A new approach for optimal decentralized load-frequency control in a multi-area interconnected power system is presented, which includes the optimal determination of decentralized load-frequency controller, observer for unmeasurable local states and load disturbances, quadratic estimator for tie-line power flow information transmitted at intervals. The optimal design of the decentralized controller is based on a modified application of the singular perturbation theory, and the decentralized Luenberger obeserver uses techniques of state augmentation for exponential disturbance functions and the representation of tie-line power flow states as non-directly-controlled inputs. The approach presented herein is numerically tested through Elgerd's two-area load-frequency system model, and the results demonstrate remarkable advantages over the conventional ones.