A most widespread method for coal gasification is the use of fluidized bed reactors. A new concept in recirculating fluidized bed gasification is the Judd two-compartment gasifier. The two compartments provide separated zones for gasification with steam and for combustion with air, within the same vessel. The circulation of inert solids transmits the heat from the combustion zone into the gasification zone. Lumped parameter model for the system is formulated by heat and mass balances and a set of simplifying assumptions. Optimal steady state - bringing the gasification rate to a maximum - is defined and the model is linearized about this state. The system is asymptotically stable, controllable and observable. An LQG controller, capable of rejecting input disturbances and measurement noise and improving the dynamical response of the system, has been developed.