A rigorous coupled-wave model is proposed to simulate the diffraction characteristics of a concentric circular metal grating (CCMG) for an incident transverse-magnetic (TM) wave at terahertz frequency. An infinite series of spatial harmonic Floquet waves with Hankel distribution is used to describe the high-order diffraction waves. The corresponding coupled-wave equations are then solved numerically by transfer matrix method. It can be shown that the proposed model is unconditionally stable. Furthermore, fast convergent rate can be achieved with only a few orders of diffraction waves taken into consideration. Results show that although a lot of high-order diffraction waves could be excited by the metal grating, only a few of them will remain propagating after the diffraction. It is found that if the wavelength of the incident TM wave is relatively long, the reflection spectrum will be dominated by the 0th-order diffraction wave. The effects of incident angle and grating duty cycle on the propagating modal number and diffraction efficiency are also investigated.