This paper presents a reduced-order memoryless state observer with a γ-stability margin (0 <γ < 1) for linear discrete-time systems with multiple delays in both the state and control vectors. The dynamics of the observer are derived from a set of unstable and/or poorly damped eigenvalues of the system. A simple and systematic design method is presented. A numerical example is given to illustrate the properties of the new observer and its design method.