The concepts of conditioned-invariant, detectability and input-containing subspaces are developed within the context of observer design for 2-D Fornasini-Marchesini models in a general form. Specifically, a link is establised between these subspaces and the existence of so-called quotient observers, which estimate the local state modulo a conditioned invariant subspace. We also consider the synthesis of observers that are asymptotic in the sense that the estimation error (modulo a conditioned invariant subspace) tends to zero away from the boundary values. x i+1, j+1 = A 0 x i, j + A 1 x i+1, j + A 2 x i, j+1 +B 0 u i, j + B 1 u i+1, j + B 2 u i, j+1 , y i, j = Cx i, j + Du i, j , (1) of Kurek [18]. Our approach to defining conditioned invariant subspaces is similar to that of Willems in that we ultimately seek an observer of the form 1 ω i+1, j+1 = K 0 ω i, j + K 1 ω i+1, j + K 2 ω i, j+1 +L 0 y i, j + L 1 y i+1, j + L 2 y i, j+1 , (2) so that the estimation error e i, j Qx i, j − ω i, j , for some full row-rank matrix Q, 2 asymptotically approaches zero away from standard boundary conditions. To this end, we develop notions of conditioned-invariant, detectability and This work was supported in part by the Australian Research Council