This paper represents an application of modern control theory to the field of aerospace vehicle navigation system. An attention is paid to the reconstruction of the states of aninertially guided aerospace vehicle via a full-order observer. A mathematical model is derived to represent the motion of the vehicle. Linearization by the perturbation method is made, and the state space equations of the perturbed vertical motion are derived. The controllability and observability of the system are tested. A parametric observer is designed that estimates the states of the system. The Eigenvalues of the observer and the free parameters are used as design variables. ResUlts of such parametric observer show the necessity for optimization to achieve acceptable behaviour, of the observer in such application. An optimal observer.is designed by solving the algebraic Riceati equation . The performance of the optimal observer is demonstrated by•reconstructing the perturbed states of motion about a nominal trajectory of a vehicle dynamic light simulation.