The authors focus on exploring the -embedding balanced truncation method of coupled systems. First, the coupled system is converted into a closed-loop system. Then, the -embedding technique and the Cholesky factor-alternating direction implicit algorithm are introduced to establish the balanced truncation method. The error bound and the stability of the resulting reduced-order system are discussed. Furthermore, the proposed method is applied to reduce the order of each subsystem such that the original interconnected structure is preserved. The error bound and the stability of the corresponding reduced-order system are also investigated. Finally, two numerical examples are employed to demonstrate the efficiency of the proposed method.