This paper considers the use of balanced realizations in the context o
f plant and controller order reduction. The emphasis is placed on redu
ced-order models obtained by residualizing the less controllable and o
bservable states of a balanced realization. The residualized system, u
nlike a truncated system or an optimal Hankel-norm approximation, main
tains the steady-state gain of the system, In addition, balanced resid
ualization is seen to give good matching at low and medium frequencies
. This is favourable with regards to both plant and controller reducti
on. The method is demonstrated on examples and detailed comparisons ma
de with balanced truncation and optimal Hankel-norm approximation. The
importance of DC-gain matching and scaling in different set-ups is hi
ghlighted. Ways of reducing the 2-DOF (degree of freedom) H-infinity c
ontroller of Hoyle ef al. (1991) are discussed and important conclusio
ns drawn. A new proof of the error bound for balanced residualization
is given in an appendix.