Power system stabilizer act efficiently to damp the electromechanical oscillations in interconnected power systems. This paper presents an algorithm for the optimal parameter selection of a power system stabilizer in two-area power systems with a series HVDC link. This method is one of the classical techniques by allocating properly pole-zero positions to fit as closely as desired the ideal phase lead between the voltage reference and the generator electrical power and by changing the gain to produce a necessary damping torque over the matched frequency range. The small signal stability and transient stability studies using the PSS parameters obtained from this method show that a natural oscillation frequency of the study case system is adequately damped. The simulation used in the paper was performed by the Power System Toolbox software program based on MATLAB.