Sequence alignment is a common method for finding protein structurally conserved/similar regions.However, sequence alignment is often not accurate if sequence identities between to-be-aligned sequences are less than 30%. This is because that for these sequences, different residues may play similar structural roles and they are incorrectly aligned during the sequence alignment using substitution matrix consisting of 20 types of residues. Based on the similarity of physicochemical features,residues can be clustered into a few groups. Using such simplified alphabets, the complexity of protein sequences is reduced and at the same time the key information encoded in the sequences remains. As a result, the accuracy of sequence alignment might be improved if the residues are properly clustered.Here, by using a database of aligned protein structures (DAPS), a new clustering method based on the substitution scores is proposed for the grouping of residues, and substitution matrices of residues at different levels of simplification are constructed. The validity of the reduced alphabets is confirmed by relative entropy analysis. The reduced alphabets are applied to recognition of protein structurally conserved/similar regions by sequence alignment. The results indicate that the accuracy or efficiency of sequence alignment can be improved with the optimal reduced alphabet with N around 9.