The state variables estimated in an observer were useed in feedback control of a hydraulic servosystem to increase the system stability and to enhance the system performance. The nonlinear hydraulic servosystem with the inherent nonlinearities due to the square root function of flow equation, the Coulomb friction and so on, was modelled as a fourth order linear hydraulic servosystem. Also, a second order linear system was derived for the observer-controller design. For these models, a fourth order linear observer and a second order linear observer were constructed respectively to evaluate the performance of the observer-based hydraulic servosystem. The results obtained from series of simulation showed that the system which had shown oscillatory phenomenon under proportional control became stable with the same maximum acceleration and velocity that it had started under proportional control.