In this paper, the fuzzy logic controller (FLC) based power system stabilizer (PSS) with compressed / reduced rule is presented. The FLC rule base is generally based on empirical control rules. In this method, the fuzzy system with a large number of fuzzy rules is compressed to a fuzzy system with a reduced number of rules by removing the redundant and inconsistent rules from the rule base which doesn't affect the performance of the fuzzy logic controller. The FLC based PSS has two input signals as speed deviation and derivative of speed deviation with an appropriate number of linguistic variables. The number of compressed rules in the rule base through the proposed dominant rule algorithm is reduced to a number as low in the number of selected linguistic variables to represent input and output signals. The application of the FLC with compressed rules as a power system stabilizer (CR-FPSS) is investigated by simulation studies on a single-machine infinite-bus system (SMIB). The superior performance of this compressed rule based fuzzy PSS (CR-FPSS) as compared to conventional PSS and proves the better efficiency of this new CR-FPSS. The reduced CPU computational time and storage space as compared to the fuzzy power system stabilizer (FPSS), proves its applicability in control.