This paper applies the proportional-integral (PI) observer in connection with loop-transfer recovery (LTR) design for discrete-time systems. Both the prediction and the filtering versions of the PI observer are considered. We show that a PI observer makes it possible to obtain time recovery, i.e., exact recovery for t --> infinity : under mild conditions. Two systematic LTR design methods, one based on an extension of the linear quadratic Gaussian loop-transfer recovery (LQG/LTR) and the other based on linear matrix inequality (LMI), are derived for the discrete-time PI observer case. Explicit expressions for the recovery error when exact recovery is not achievable for all frequencies are also given.