Abstract: The problem of reactive relay selection for two-way decode-and-forward relaying is investigated. First, the achievable rate region of conventional three-node scenario is characterized. Then, a closed-form expression of the outage probability is derived. Next, by using the channel state information and with the aid of traffic knowledge, a reactive relay selection criterion is proposed. Further, optimal power allocation between superposed signals at the relay is investigated. As a result, two novel policies selecting the optimal scaling coefficients are presented and analyzed in terms of outage probability. Simulation results demonstrate that the system outage performance is improved significantly, especially when the channels are asymmetric.