In this paper, a new method is presented to derive a reduced order model for a discrete time systems. This method is based on modified pole clustering technique and pade approximations using bilinear transformations, which are conceptually simple and computer oriented. The denominator polynomial of the reduced order model is obtained by using modified pole clustering technique and numerator coefficients are obtained by Pade approximations. This method generates stable reduced models if the original higher order system is stable. The proposed method is illustrated with the help of typical numerical examples considered from the literature.