Recently, within a centralized control framework, the authors proposed a time-delay reduction method to achieve improved transparency in time-delay teleoperation. In this paper, a decentralized version of the controller is introduced that can further enhance the teleoperation transparency and robust stability by allowing the use of local delay-free measurements in local master/slave controllers. State/observation transformations are proposed that produce delay-free dynamics/measurements from the perspective of the local controllers at the master and slave stations. It is shown that the use of local suboptimal linear quadratic Gaussian master and slave controllers results in a delayed state perturbation term in the closed-loop dynamics. The stability of the system is then analyzed using a delay-dependent frequency sweeping test. The controllers employ a simple switching logic to handle large variations in the environment dynamics from free motion to rigid contact. The performance and robustness of the new decentralized controller are compared with those of the centralized controller using numerical analysis. Experimental results demonstrate the effectiveness of the proposed approach.