A new design way for power system stabilizer (PSS) and DC additional controller to solve low frequency oscillation (LFO) problem is proposed. The oscillation characteristics of the system are analyzed through total least squares-estimation of signal parameters via improved rotational invariance techniques (TLS-ESPRIT) firstly, and then the transfer functions of all oscillation modes are captured respectively. Finally, the controllers are design out by linear quadratic regulator (LQR) method based on observer. In the designing procedure, the LQR PSS is used for intra-area LFO and DC additional LQR controller is used for inter-area LFO.