Problem of damping electromechanical oscillations in electric power systems is not new. Since the 1950s, when power systems started to get bigger and ever more stressed, engineers have been looking for synchronous generator controllers that could improve damping of oscillations. The most popular tool for power system stability enhancement is the power system stabilizer (PSS) which provides an auxiliary control loop to the main automatic voltage regulator (AVR). PSS structure usually follows one of IEEE standards [1]. PSSs are usually of the single-input type with constant parameters (time-invariant) but two-input stabilizers are used too. PSS design is usually based on the compensation of plant frequencycharacteristics, optimization of defined quality indices, or shifting poles of the considered system to appropriate locations.The problem of the poorly damped low-frequency (0.1 - 2Hz) oscillations of power systems has been a matter of concern to power engineers, because they limit the power transfer capability in power systems. The power systems stability is also affected by these poorly damped oscillations and can lead to the system instability. The paper presents a design PSSs to enhance power systems stability and improve power transfer capability. MATLAB dynamic model was developed for a power system and lead-lag PSS structure is considered in the model. Damping torque technique is applied to tune the PSS parameters. The results of this technique have been verified by eigenvalue analysis and time-domain simulations. The simulations results show that the system time responses under different operating conditions are well damped with the designed PSS.