Defence Secretary Ben Wallace said "increased deployability and technological advantage" meant greater effect could be delivered by fewer people.
He set out plans for new capabilities such as electronic warfare and drones in a command paper in the Commons.
However, the opposition Labour party has warned that "size matters" when it comes to defence.
Announcing a major overhaul of the armed forces, Wallace said it marked a shift from "mass mobilization to information age speed", insisting they must be able to "seek out and understand" new threats to the country's security.
A cut to the size of the Army had been anticipated -- with a reduction of 10,000 widely trailed. What Defence Secretary Ben Wallace announced was a cut to the target for the number of fully trained people in the Army, from 82,040 today to 72,500 in 2025.
The changes set out in the paper -- titled Defence in a Competitive Age -- include three billion pounds for new vehicles, long-range rocket systems, drones, electronic warfare and cyber capabilities.
The UK is putting more resources into cyber warfare via the creation of the National Cyber Force based in the North West of England. It is putting more resources ($6.6 billion for research and development) into space that may function similarly to the US Space Force.