The problem of minimal state space realization of two-dimensional systems is considered. The approach followed is, initially, to derive a circuit realization of the given transfer function involving a minimum number of delay elements. To facilitate this realization, the transfer function is expanded into a continued fraction. Using this circuit realization, an algorithm is proposed which readily provides the matrices of the state space model. The simplicity in deriving this model is due to a novel state space model introduced, which is of cyclic structure. Several examples are presented to illustrate the proposed algorithm.