Abstract-This paper presents a generalized solution to the problem of optimal control of systems having an extra set of exogenous inputs besides control inputs. The solution is derived in the framework of linear quadratic control and it is termed 'extended linear quadratic regulator (ELQR)'. The ELQR is applied for control of unstable or poorly damped oscillatory dynamics occurring in a power system and is shown to be significantly more cost effective than the classical power system stabilizer (PSS) based approach.Index Terms-optimal control, extended linear quadratic regulator, exogenous input, external disturbance, pseudo-input, power system dynamics, small signal stability, power system stabilizer NOMENCLATURE 0 m×n a matrix of zeroes of size (m × n) Γ the function of quadratic costs without considering u ′