This paper proposes an optimal recursive estimator to estimate the states of a stochastic discrete time linear dynamic system when the states of the system are constrained with inequality constraints. The case when the constraints are strictly satisfied is treated independently from the case when some of the constraints are violated. For the first case, the well known Kalman filter estimator is used. In the second case, an algorithm which uses a series of successive orthogonalizations on the measurement subspaces is employed to obtain the optimal estimate. It is shown that the proposed estimator has several attractive properties such that it is an unbiased estimator. More importantly, compared to other estimator found in the literature, the proposed estimator needs less computational efforts, is numerically more stable and it leads to a smaller variance. To show the effectiveness of the proposed estimator, several simulation results are presented and discussed.