Orthogonal frequency division multiplexing (OFDM) system with frequency domain equalization (FDE) requires reliable channel estimation (CE). OFDM has a problem of high peak-to-average power ratio (PAPR), which makes it very sensitive to nonlinear distortions, affecting the channel estimation accuracy. In this paper, we investigate the effect of the nonlinearity to the the OFDM system with pilot-assisted CE based on time or frequency division multiplexed (TDM/FDM) pilot. A closed-form bit error rate (BER) expressions for OFDM system are derived in a nonlinear and frequency-selective fading channel. The analysis is based on the Gaussian approximation of the nonlinear noise, which is also confirmed by computer simulation. Our results in terms of BER and mean square error (MSE) show, that FDM-pilot based CE is more sensitive to nonlinear distortions as compared to CE based on TDM-pilot.