The objective of this paper is to design a state feedback controller to damp out the inter-area oscillations in the power system network with limited wide area measurements. The conventional state feedback controller designed through LQR optimization requires all the state variables as input. However, the dynamics of a power system is governed by a large number of state variables. Therefore, it is, practically, not possible to place sensors everywhere for monitoring the complete system state in real-time. In order to address the particular issue, an optimized state feedback controller is proposed, which can be implemented with limited number of state inputs. The structurally constrained H2-norm optimization technique is employed to perform the proposed state feedback controller design. The reference frame requirement for defining the rotor angles of generators under the scenario of limited state observability is also investigated. The performance of the wide area controller with limited state inputs is verified through a case study on the New England 39-bus system under different scenarios of state unobservability. © 2015 IEEE.