A self-consistent nonlinear theory of current modulation in an electron beam propagating through relativistic klystrons connected to a coaxial waveguide is developed. A theoretical model of the beam-energy increase Δγ near the extraction cavity is also developed, based on the self-potential depression. The potential depression κ can be significantly reduced in the vicinity of the extraction cavity from its value at the injection point. In appropriate system parameters, the kinetic-energy increase can easily be more than 50 keV, thereby eliminating the possibility of virtual cathode in the extraction cavity. Properties of the current modulation in a klystron are also investigated, assuming that a regular cylindrical waveguide is connected to a coaxial waveguide at the propagation distance z=z1. Due to proximity of a grounded conductor, the beam’s potential depression κ in the coaxial region is considerably less than that in the regular region. It is shown in the present analysis that amplitude of the current modulation increases drastically as the coaxial inner-conductor approaches the driving cavity. Moreover, the amplitude of the current modulation in the coaxial region changes slowly in comparison with that in the regular region.