High peak-to-average power ratio (PAPR) is a major drawback of orthogonal frequency division multiplexing (OFDM) systems. Among the various PAPR reduction techniques, companding transform appears attractive for its simplicity and effectiveness. This paper proposes a new companding algorithm. Compared with the others, the proposed algorithm offers an improved bit error rate and minimized out-of-band interference while reducing PAPR effectively. Theoretical analysis and numerical simulation are presented.