In this paper, we present a nonlinear feedback linearization-full order observer/sliding mode controller (NFL-FOO/SMC), to obtain smmoth control as a linearized controller in a linear system (or to cancel the nonlinearity in a nonlinear system), and to solve the problem of the unmeasurable state variables as in the conventional SMC. The proposed controller is obtained by combining the nonlinear feedback linearization-sliding mode control (NFL-SMC) with the full order observer (FOO)and eliminates the need to measure all the state variables in the traditional SMC. The proposed controller is applied to the nonlinear power system stabilizer (PSS) for damping oscillations in a power system. The effectiveness of the proposed controller is verified by the nonlinear time-domain simulations in case of a 3-cycle line-to-ground fault and in case of the parameter variation for the AVR gain Kulcorner and for the inertia moment M.