This paper proposes a tension control to compensate friction loss using on-line friction torque observer for a continuous strip processing line. Friction loss of roller results in significant deviation of strip tension, accordingly it has an influence on the operation of other adjacent rolls. To avoid tension variation of the strip, a friction torque observer is designed in adjacent roll, which operates in speed control mode. The observed torque is added to the torque limit reference of the pay-off reel for on-line compensation of both friction loss and acceleration/deceleration torque at the same time. The simulation and experimental results show improvement of tension control performance by the proposed friction compensation method.