A digital control system for the steam generator oater level control is developed using the optimal control technique. To describe the more realistic situation, a feedwater valve actuator of the first order lag is included in the overall control system. The optimal gains are obtained by the LQ method which imposes the constraints on the feedwater valve motion as well as on the deviation between the input demand signal and the output feedwater. Developed also is a Kalman observer on account of the flow measurement uncertainty at low power. And a digital controller on the feedback loop is designed which makes the system maintain the same stability margins for all power ranges. The simulation results show that the optimal digital system has good control characteristics despite the adverse dynamics of the steam generator at low power.