In this paper, a delay-dependent state feedback based supplementary damping controller of Thyristor Controlled Series Capacitor (TCSC) is designed to enhance the damping of inter-area oscillations of an interconnected power system. Although wide-area feedback signals are advantageous for damping enhancement of inter-area modes, but its usage as feedback signals in designing of a damping controller together with physical limitation of the actuator introduces time-delay and actuator saturation in the feedback loop. This results in degradation of the power system performance and even cause instability. The paper focuses on designing a damping controller considering the aforesaid time-delay and actuator saturation effects. Residue approach and Schur balanced truncation model reduction methods are used to obtain input-output control signals and reduced order power system model. The nonlinear effects of the actuator saturation are consider in the closed-loop system by using generalized sector condition. Based on Lyapunov–Krasovskii functional approach, a delay-dependent stability and stabilization conditions via linear matrix inequalities (LMIs) formulation are derived to guarantee the asymptotic stability of the closed-loop system. Then the problem of designing a state feedback control law which maximizes the region of attraction is formulated and solved as an optimization problem with LMI constraints. Simulation studies in the two-area four-machine power system demonstrate the effectiveness of the proposed controller for damping enhancement of the inter-area oscillations and compensating the effect of time-delays and actuator saturation. © 2018 Elsevier B.V.