In this paper, a novel method for the design of output feedback controller for unified power flow controller (UPFC) using chaotic optimization algorithm (COA) is developed. Chaotic optimization algorithms, which have the features of easy implementation, short execution time and robust mechanisms of escaping from the local optimum, is a promising tool for the engineering applications. The selection of the output feedback gains for the UPFC controllers is converted to an optimization problem with the time domain-based objective function which is solved by a COA based on Lozi map. Since chaotic mapping enjoys certainty, ergodicity and the stochastic property, the proposed chaotic optimization problem introduces chaos mapping using Lozi map chaotic sequences which increases its convergence rate and resulting precision. To ensure the robustness of the proposed stabilizers, the design process takes into account a wide range of operating conditions and system configurations. The effectiveness of the proposed controller for damping low frequency oscillations is tested and demonstrated through non-linear time-domain simulation and some performance indices studies. The results analysis reveals that the designed COA based output feedback UPFC damping controller has an excellent capability in damping power system low frequency oscillations and enhance greatly the dynamic stability of the power systems. (C) 2010 Elsevier Ltd. All rights reserved.