This paper studies the stability and stabilization of hydraulic automatic gauge control (HAGC) systems with time-varying delay and actuator saturation. First, a mathematical model of HAGC systems is established considering the measurement delay and saturation factors. With the help of state transformation, the measurement delay is transformed into input delay and the generalized sector condition is adopted to deal with the saturation problem in HAGC systems. Then, a new augmented L–K functional is constructed to contain more delay information to reduce the conservativeness of the stability criteria. Furthermore, by combining the proposed L–K functional with some advanced inequalities, the stability conditions and controller are derived with the aid of linear matrix inequalities (LMIs). Finally, the effectiveness of the proposed control algorithm is verified by simulation results.