The improvement of generator stability by the use of supplementary signals into the voltage regulator and governor loops using discrete-time linear optimal control theory has been studied with particular emphasis on providing better damping for torsional oscillations. A multi-inertia laboratory model equipped with data acquisition and control computers was constructed to model the shaft dynamics of a 660 MW Drax turbine-generator. It is shown that the shaft torsional phenomena can be adequately simulated on a micro-synchronous-generator at least as far as the dominant shaft torsional modes of vibration are concerned. The practical implementation of multi-mode linear quadratic Gaussian (LQG) controllers has been shown to enhance system stability and provide better damping to the lower frequency torsional modes, which are those most susceptible to excitation.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">></ETX>