In this paper, a novel method for the design of output feedback controller for unified power flow controller (UPFC) is developed. The selection of the output feedback gains for the UPFC controllers is converted to an optimization problem with the time domain-based objective function which is solved by a particle swarm optimization technique (PSO) that has a strong ability to find the most optimistic results. Only local and available state variables are adopted as the input signals of each controller for the decentralized design. Thus, structure of the designed UPFC controller is simple and easy to implement. To ensure the robustness of the proposed stabilizers, the design process takes into account a wide range of operating conditions and system configurations. The effectiveness of the proposed controller for damping low frequency oscillations is tested and demonstrated through nonlinear time-domain simulation and some performance indices studies. The results analysis reveals that the designed PSO-based output feedback UPFC damping controller has an excellent capability in damping power system low frequency oscillations and enhance greatly the dynamic stability of the power systems. Moreover, the system performance analysis under different operating conditions show that the delta(E) based controller is superior to both the m(B) based controller and conventional power system stablizer. (C) 2009 Elsevier Ltd. All rights reserved.