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The aim of service discovery is to discover services based on preferences given by service consumers. Many approaches are using keyword based syntactic methods and recent approaches are using semantic Web technology to enhance service discovery. Traditional service discovery mechanism acts like a black box which processes input and gives output. Results of service discovery are not based on current situations. Real world is event driven and situations keep on changing in a dynamic manner. Situations affect service providers and service requesters. Hence, service discovery results should be situation aware. By introducing situation awareness (dynamic context) in service discovery, one can get relevant results. There is a need to maintain dynamically changing context of various services. This work proposes service discovery algorithm, which is based on rule engine. Implemented algorithm gives higher recall value and situation aware results while discovering services.