This paper presents a novel coordinated algorithm for distributed state estimation where Phasor Measurement Units (PMUs) measurements are considered at both subsystem level and coordination level. At the coordination level, the linear state estimation with PMUs is carried out to coordinate the voltage states of boundary buses where the computational time can be significantly reduced. Tests on the IEEE 30-bus and 118-bus system are used to show the performance of the novel distributed state estimation algorithms and compare results with the previous distributed state estimation algorithm in terms of both the estimation quality and computational performance. The distributed state estimation is compatible with the distributed control architecture for the operation of the future Smart Grid, where a large power system can be decomposed into subsystems and the subsystems can be estimated, operated and controlled in the distributed environments. (C) 2011 Elsevier Ltd. All rights reserved.