A number of studies recently have proposed optical spatial modulation (SM) as a simple, power- and bandwidth efficient modulation scheme for free-space optical communication (FSO) systems. In these studies, it was assumed that an active laser source only sends the signal to one targeted photodetector (PD). However, undesirable PDs still can receive the signal from the active source due to geometric spreading (i.e., laser beam broadening). In addition, if the fading channels between the active source and multiple PDs are correlated, the probability of wrong detection of the active source’s index during spatial demodulation process may increase. In this paper, we first analyze the impact of geometric spreading on the performance of FSO systems using SM over uncorrelated Gamma–Gamma fading channel. We find that the advantage in reducing the transmission bandwidth of SM cannot compensate its limitation in suffering from geometric spreading. We then propose to combine N-SM with pulse-position modulation (L-PPM) and transmit diversity ( $$M\,\times \,1$$ M × 1 MISO) to improve the performance of SM-based FSO systems. The numerical results, which are validated by Monte–Carlo simulations, confirm the superiority of the proposed system in comparison with the conventional ones.