In CSMA/CA-based, multi-hop, multi-rate wireless networks, spatial reuse can be increased by tuning the carrier-sensing threshold (Tcs) to reduce the carrier sense range (dcs). While reducing dcs enables more concurrent transmissions, the transmission quality suffers from the increased accumulative interference contributed by concurrent transmissions outside dcs. As a result, the data rate at which the transmission can sustain may decrease. How to balance the interplay of spatial reuse and transmission quality (and hence the sustainable data rate) so as to achieve high network capacity is thus an important issue. In this paper, we investigate this issue by extending Calí's model and devising an analytical model that characterizes the transmission activities as governed by IEEE 802.11 DCF in a single-channel, multi-rate, multi-hop wireless network. The systems throughput is derived as a function of Tcs, SINR, β, and other PHY/MAC systems parameters. We incorporate the effect of varying the degree of spatial reuse by tuning the Tcs. Based on the physical radio propagation model, we theoretically estimate the potential accumulated interference contributed by concurrent transmissions and the corresponding SINR. For a given SINR value, we then determine an appropriate data rate at which a transmission can sustain. To the best of our knowledge, this is perhaps the first effort that considers tuning of PHY characteristics (transmit power and data rates) and MAC parameters (contention backoff timer) jointly in an unified framework in order to optimize the overall network throughput. Analytical results indicate that the systems throughput is not a monotonically increasing/decreasing function of Tcs, but instead exhibits transitional points where several possible choices of Tcs can be made. In addition, the network capacity can be further improved by choosing the backoff timer values appropriately.