In the paper, an output-based disturbance observer of reduced order is presented for a class of discrete-time linear systems. First, a general form of a disturbance observer is proposed when full states are available. Then, by combining a state function estimator of minimal order, an output-based disturbance observer is derived. The existence condition will be formulated in the form of a static output feedback. Through examples, the effectiveness and advantages of the proposed approach will be demonstrated. A servo control problem in practice is addressed to show the validity of the approach. Furthermore, it will be shown that the proposed approach does provide a smaller order of disturbance observer than that of conventional approaches, while maintaining satisfactory performances. (C) 2013 Elsevier Ltd. All rights reserved.