Since its introduction (e.g., [4, 6]), virtual coupling technique has been de facto way to connect a haptic device with a virtual proxy for haptic rendering and control. However, because of the single dependence on spring-damper feedback action, this virtual coupling suffers from the degraded transparency particularly during contact tasks when large device/proxy-forces are involved. In this paper, we propose a novel virtual coupling technique, which, by utilizing passive decomposition, reduces device-proxy position deviation even during the contact tasks while also scaling down (or up) the apparent inertia of the coordinated device-proxy. By doing so, we can significantly improve transparency between multiple degree of freedom (possibly nonlinear) haptic device and virtual proxy. In other to use passive decomposition, disturbance observer of [3] is adopted to estimate human force with some dead-zone modification to avoid “winding-up” force estimation in the presence of device torque saturation. Some preliminary experimental results are also given to illustrate efficacy of the proposed technique.