In order to minimize shroud leakage and its effect on aerodynamic loss of steam turbines, a new shroud seal design by employing spiral-grooved gas face seal theory is presented. To verify the method, a flow numerical simulation was conducted to investigate the effect of the new shroud seal on aerodynamic loss in steam turbine rotor row. The results show, compared with a traditional two-tooth labyrinth seal, the new shroud seal leakage is reduced by 99.3%, and the rotor row efficiency is improved by 1.9%. Furthermore, a feasibility analysis including lift and stiffness of gas film, tracking response of primary ring and deformation of mating ring was presented. The present design is a potential approach to further improve turbine stage performance.