One of the major disadvantages of OFDM communication systems is their high peak-to-average power ratio (PAPR) which degrades system performance when nonlinear power amplifiers are employed. Among the proposed PAPR techniques companding is favorable due to its simplicity and easy of implementation. In this article, using the arctangent function we propose a new compading technique for PAPR reduction. We compare the proposed technique to the previously suggested exponential companding, and μ-law companding methods. Via computer simulations it is verified that the proposed technique is better than exponential and μ-law companding methods for PAPR reduction.