With increasing sustainable development consciousness, sustainable design plays an important role not only in design phase but also in manufacturing process. This paper proposes a modular design methodology for achieving sustainable design as well as fulfilling functional requirements. Factors related to function and sustainability of products such as material, manufacturability, component life and so on are defined as modular drivers. Design structure matrix, a structured method which has advantages on representing and analyzing interaction relations among system elements, is employed to establish correlation matrix between components. K-means algorithm is used to integrate the basic components into design modules based on their correlation distance. Furthermore, an evaluation model is established for assessing sustainability of modular products. Finally, a reduction gear is used as a case study example.