A digital power system stabilizer ( DPSS ) and its design method are presented in this paper. The mathematical model of a single machine infinite bus power system is obtained using off-line parameter identifications, and on the base of the identified model the control system is synthesized by generalized minimum variance control principles. Through feedback combination of several signals this control system has double functions of damping low frequency oscillation and automatic voltage regulating. In order to avoid static errors the very effective way is to combine discrete generalized minimum variance control with continuous integral control. Besides the proposed control strategy is very simple in structures and very easy to realize. Simulation results under several cases have shown the correctness and effectiveness of the proposed control strategy.