An output prediction method based on state space model is proposed to overcome the poor reliability of the prediction method that does not use system model. The open-loop state observer is established based on the system state space model. Then the output prediction model is built in which the prediction error is used as input and a correction module is also contained. The module is used to correct the prediction error, and then the current predicted output can be obtained by the model from the delayed output. At last, a wide-area damping controller in power systems based on output prediction is designed to verify the effectiveness of the method.