A feedback controller for maintaining the concentration of dissolved oxygen (DO) at a specified level in a single stretch of a non-tidal river stream polluted by effluents is described. The control signals are artificial instream aeration and rate of effluent discharge. An observer is used to estimate the incremental changes in the down stream biochemical oxygen demand (BOD) from a knowledge of the output DO and upstream DO and BOD. This estimate and the output DO are used to generate the control signals. Computer simulation results are included. A comparison of these results with those obtained earlier by mentis of n constant gain output feedback control (Gouriahankar and Ramur 1077) indicates that the present scheme enables greater quantities of effluents to be discharged for the same upstream disturbances.