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Modern control theory is one of the basic professional course for the senior undergraduates, such as automation, electrical engineering and automation specialties. It has the characteristics of higher theoretical definition and abstraction, bigger calculated amount, degree of depth and complexity, and the students should have well-knit mathematical foundation. The study can be made more interesting and challenging by introducing the simulation technology into course teaching. By applying MATLAB language and Simulink simulation tools, combining with the teaching examples, the system synthesis design problem in modern control theory course can be dealt with very easy. A closed-loop control system with full-order state observer is designed. The design process shows that fundamental changes in modern control theory course teaching have been made by MATLAB language and Simulink tools. The teaching process is converged to the combination of practical engineering case and vivid teaching from original dry pure theory teaching.