This paper concerns the application and demonstration of sliding mode observer for aeroelastic system, which is robust to model uncertainty including mass and stiffness of the system and various disturbances. The performance of a sliding mode observer is compared with that of a conventional Kalman filter to demonstrate robustness and disturbance decoupling characteristics. Aeroelastic instability may occur when an elastic structure is moving even in subcritical flow speed region. Simulation results using sliding mode observer are presented to control aeroelastic response of flapped wing system due to various external excitations as well as model uncertainty and sinusoidal disturbances in subcritical incompressible flow region.