This article studies the parametric design of reduced-order functional observer (ROFO) for linear time-varying (LTV) systems. Firstly, existence conditions of the ROFO are deduced based on the differentiable nonsingular transformation. Then, depending on the solution of the generalized Sylvester equation (GSE), a series of fully parameterized expressions of observer coefficient matrices are established, and a parametric design flow is given. Using this method, the observer can be constructed under the expected convergence speed of the observation error. Finally, two numerical examples are given to verify the correctness and effectiveness of this method and also the aircraft control problem.