The paper describes the development of a decomposition based multidisciplinary design optimization (MDO) method that coordinates each of disciplinary subspace optimization (DSO). A multidisciplinary design system considered in the present study is decomposed into a number of subspaces based on their own design objective and constraints associated with engineering discipline. The coupled relations among subspaces are identified by interdisciplinary design variables. Each of subsystem level optimization, that is DSO would be performed in parallel, and the system level coordination is determined by the first order optimal sensitivities of subspace objective functions with respect to interdisciplinary design variables. The central of the present work resides on the formulation of system level coordination strategy and its capability in decomposition based MDO. A fluid-structure coupled design problem is explored as a test-bed to support the proposed MDO method.