In this paper a robust method is presented for the combined design of STATCOM and Power System Stabilizer (PSS) controllers in order to enhance the damping of the low frequency oscillations in power systems. The combined design problems among PSS and STATCOM internal ac and dc voltage controllers has been taken into consideration. The equations that describe the proposed system have been linearized and a Fuzzy Logic Controller (FLC) has been designed for the PSS. Then, the Particle Swarm Optimization technique (PSO) which has a strong ability to find the most optimistic results is employed to search for the optimal STATCOM controller parameters. The proposed controllers are evaluated on a single machine infinite bus power system with the STATCOM installed in the midpoint of the transmission line. The results analysis reveals that the combined design has an excellent capability in damping a power system's low frequency oscillations, and that it greatly enhances the dynamic stability of power systems. Moreover, a system performance analysis under different operating conditions and some performance indices studies show the effectiveness of the combined design.