The steam generator level is susceptible to the nonminimum phase in dynamics due to the thermal reverse effects known as "shrink and swell" in a pressurized water reactor. A state feedback assisted control concept is presented for the change of dynamic performance to the minimum phase the concept incorporates a nonlinear digital observer as a part of the control system. The observer is deviced to estimate the state variables that provide the true indication of water inventory by compensating for shrink and swell effects. The concept is validated with implementation into the steam generator simulation model.