Mr Rumsfeld arrived early on Friday for a surprise visit to the Sunni bastion of Fallujah, 50 kilometres west of Baghdad where he met with around 300 US troops.
He said the decision is mainly due to Iraqi progress on the political, economic and security fronts.
"President (George W) Bush has authorised an adjustment in US combat brigades in Iraq from 17 to 15, said Mr Rumsfeld, addressing US troops at a military camp.
"The adjustments being announced are the recognition of the Iraqi people's progress in assuming added responsibility for their country," he said, adding that the US and Iraqi governments will continue to evaluate the troop situation in coming months.
"We anticipate future coalition force-level discussions at some point in 2006, after the new Iraqi government is in place and is prepared to discuss the future," he added.
A new Iraqi government is expected to be installed early next year in the wake of the December 15 general elections whose final results are not yet known.
"Let me be very clear: The challenges ahead, military, political, economic, will not be easy. The United States as all you know did not come to Iraq for oil, not to occupy. We came here only to help," Rumsfeld also said.
Speaking of Fallujah, a former rebel bastion, Rumsfeld praised progress made in the town saying it has "some of the highest voter registration and turn-out rates in the country and has increasingly capable and confident Iraqi security forces in the streets helping to maintain order and to hunt down terrorists".
The defence secretary flew in to Iraq from Afghanistan to visit US troops ahead of the Christmas holiday.