The paper focuses on the design of excitation controller and power system stabilizer (PSS) control schemes to enhance voltage regulation and transient stability. To design the excitation controller, the nonlinear models of the synchronous generator and electrical system are suitably arranged to give an input–output nonlinear model, which is subsequently made linear by a compensating law. The PSS control scheme is designed according to a new approach, based on the inverse system theory, which guarantees satisfactory swing damping by reducing the mutual influence between transient stability and voltage regulation. The results obtained by numerical simulations in different operating conditions confirm the effectiveness of the proposed design, also in the presence of model parameter inaccuracy.