In this paper, a particle swarm optimization (PSO) based multi-stage fuzzy (PSOMSF) controller is proposed for solution of the load frequency control (LFC) problem in a restructured power system that operate under deregulation based on the bilateral policy scheme. In this strategy the control is tuned on line from the knowledge base and fuzzy inference, which request fewer sources and has two rule base sets. In the proposed method, for achieving the desired level of robust performance, exact tuning of membership functions is very important. Thus. to reduce the design effort and find a better fuzzy system control, membership functions are designed automatically by PSO algorithm, that has a strong ability to find the most optimistic results. The motivation for using the PSO technique is to reduce fuzzy system effort and take large parametric uncertainties into account. This newly developed control strategy combines the advantage of PSO and fuzzy system control techniques and leads to a flexible controller with simple stricture that is easy to implement. The proposed PSO based MSF (PSOMSF) controller is tested on a three-area restructured power system under different operating conditions and contract variations. The results of the proposed PSOMSF controller are compared with genetic algorithm based multi-stage fuzzy (GAMSF) control through some performance indices to illustrate its robust Performance for a wide range of system parameters and load changes. (C) 2008 Elsevier Ltd. All rights reserved.