This paper addresses the analysis of diversity-multiplexing tradeoff (DMT) for a cooperative system using network coding, called the cooperative network coding (CNC) system, which combines a decode-and-forward (DF) relay with the information mixing and broadcast techniques. The outage probability in the high signal-to-noise ratio (SNR) regime is also provided in the closed-form. Our scheme has two users' nodes and one relay node. All nodes are half duplex, i.e., they cannot transmit and receive data at the same time. The two users can communicate to each other directly as well as via the relay node indirectly. Our results show that network coding can help the relay nodes provide cooperative multiplexing gain as well as diversity gain. Compared with the pure DF protocol of which maximal diversity and multiplexing gain are 1 and 1/2, respectively, the maximal diversity and multiplexing gain of the CNC protocol are 2 and 2/3, respectively. The CNC protocol has even better DMT performance than an improved version of DF, selection decode-and-forward (SDF), of which maximal diversity and multiplexing gain are 2 and 1/2, respectively. The impact of wireless lossy channel on performance gains of the network coding is analyzed and can be quantitatively evaluated in the presented DMT curve, which gives us more insight than the capacity analysis does. This is because the capacity analysis only tells us about the maximal error-free transmission rate, while the DMT curve gives us the optimal tradeoff between the error rate and data rate.