It is a long dream to realize the communication and navigation functionality in a satellite system in the world. This paper introduces how to establish the system, a positioning system based on communication satellites called Chinese Area Positioning System (CAPS). Instead of the typical navigation satellites, the communication satellites are configured firstly to transfer navigation signals from ground stations, and can be used to obtain service of the positioning, velocity and time, and to achieve the function of navigation and positioning. Some key technique issues should be first solved; they include the accuracy position determination and orbit prediction of the communication satellites, the measur- ing and calculation of transfer time of the signals, the carrier frequency drift in communication satellite signal transfer, how to improve the geometrical configuration of the constellation in the system, and the integration of navigation & communication. Several innovative methods are developed to make the new system have full functions of navigation and communication. Based on the development of crucial techniques and methods, the CAPS demonstration system has been designed and developed. Four communication satellites in the geosynchronous orbit (GEO) located at 87.5°E, 110.5°E, 134°E, 142°E and barometric altimetry are used in the CAPS system. The GEO satellites located at 134°E and 142°E are decommissioned GEO (DGEO) satellites. C-band is used as the navigation band. Dual frequency at C1=4143.15 MHz and C2=3826.02 MHz as well as dual codes with standard code (CA code and precision code (P code)) are adopted. The ground segment consists of five ground stations; the master station is in Lintong, Xi’an. The ground stations take a lot of responsibilities, including monitor and management of the operation of all system components, determination of the satellite position and prediction of the satellite orbit, accomplishment of the virtual atomic clock measurement, transmission and receiving navigation signals to and from each satellite. In the north, the south, the east, the west and the center of Chinese main land, the function of CAPS demonstration system is checked and measured. In cars and on board the system is also checked and measured. The results are as follow: CA-code, horizontal positioning accuracy, 15-25 m (1σ), vertical, 1-3 m; P-code, horizontal positioning accuracy, 8-10 m (1σ), vertical, 1-3 m; velocity accuracy, CA-code, 0.13-0.30 m/s, P-code, 0.15-0.17 m/s; time accuracy, CA-code, 160 ns, P-code, 13 ns; determination accuracy of orbit ≤2 m. About 20 million US $ and two years are spent for the development of demonstration. A complete CAPS system is now being established. It is a long dream to realize the communication and navigation functionality in a satellite system in the world. Instead paper the how to establish the system, a positioning system based on communication satellites called Chinese Area Positioning System (CAPS). satellites, the communication satellites are configured first to transfer navigation signals from ground stations, and can be used to obtain service of the positioning, velocity and time, and to achieve the function of navigation and positioning. some key technique issues should be first solved; they include the accuracy position determination and orbit prediction of the communication satellites, the measur- ing and calculation of transfer time of the signals, the carrier frequency drift in communication satellite signal transfer, how to improve the geometrical configuration of the constellation in the system, and the integration of navigation & communication. Several innovative methods ar based on the development of crucial techniques and methods, the CAPS demonstration system has been designed and developed. Four communication satellites in the geosynchronous orbit (GEO) located at 87.5 ° E , 110.5 ° E, 134 ° E, 142 ° E and barometric altimetry are used in the CAPS system. The GEO satellites located at 134 ° E and 142 ° E are decommissioned GEO (DGEO) satellites. C-band is used as the navigation band. Dual frequency at C1 = 4143.15 MHz and C2 = 3826.02 MHz as well as dual codes with standard code (CA code and precision code (P code)) are adopted. The ground segment consists of five ground stations; the master station is in Lintong, Xi’an. The ground stations take a lot of responsibilities, including monitor and management of the operation of all system components, determination of the satellite position and prediction of the satellite orbit, accomplishment of the virtual atomic clock measure ment, transmission and receiving navigation signals to and from each satellite. In the north, the south, the east, the west and the center of Chinese main land, the function of CAPS demonstration system is checked and measured. The results are as follows: CA-code, horizontal positioning accuracy, 15-25 m (1σ), vertical, 1-3 m; P-code, horizontal positioning accuracy, 8-10 m vertical, 1-3 m; velocity accuracy, CA-code, 0.13-0.30 m / s, P-code, 0.15-0.17 m / s; time accuracy, CA-code, 160 ns, P-code, 13 ns; accuracy of orbit ≤2 m. About 20 million US $ and two years are spent for the development of demonstration. A complete CAPS system is now established.