The problem of observer design for a class of nonlinear discrete-time systems with time-delay is considered. A new approach of nonlinear observer design is proposed for the class of systems. Based on differential mean value theory, the error dynamic is transformed into linear parameter variable system. By using Lyapunov stability theory and Schur complement lemma, the sufficient conditions expressed in terms of matrix inequalities are obtained to guarantee the observer error converges asymptotically to zero. Furthermore, the problem of observer design with affine gain is investigated. The computing method for observer gain matrix is given and it is also demonstrated that the observer error converges asymptotically to zero. Finally, an illustrative example is given to validate the effectiveness of the proposed method.