M channel maximally decimated filter banks have been used in the past to decompose signals into subbands. The theory of perfect-reconstruction filter banks has also been studied extensively. Nonparaunitary systems with linear phase filters have also been designed. In this paper, we study paraunitary systems in which each individual filter in the analysis synthesis banks has linear phase. Specific instances of this problem have been addressed by other authors, and linear phase paraunitary systems have been shown to exist. This property is often desirable for several applications, particularly in image processing. We begin by answering several theoretical questions pertaining to linear phase paraunitary systems. Next, we develop a minimal factorization for a large class of such systems. This factorization will be proved to be complete for even M. Further, we structurally impose the additional condition that the filters satisfy pairwise mirror-image symmetry in the frequency domain. This significantly reduces the number of parameters to be optimized in the design process. We then demonstrate the use of these filter banks in the generation of M-band orthonormal wavelets. Several design examples are also given to validate the theory.