The stabilization of power system oscillations between interconnected areas is very essential for the secure system operation. Although PSS and FACTS devices have been applied to multi-machine power systems for enhancing the system stability, only use of the conventional PSS may not provide sufficient damping particularly for inter-area oscillations. In these circumstances, FACTS controllers are expected to be effective solutions. Furthermore, in recent years, with the deregulation of the electricity market, the traditional concepts and practices of power systems that new construction of equipment should be continued to maintain the supply reliability have changed. Better utilization of the existing power systems to increase capacities by allocating FACTS devices becomes imperative. However, FACTS, such as TCSC has been used conventionally to regulate the local mode oscillation. In this paper, a coordinated control of PSS and FACTS devices is proposed to improve the inter-area mode oscillation at the minimum cost. The approach presented here enables us to allocate a set of TCSC to improve the stability of interconnected power systems. The proposed approach determines the location of controllers by making use of the eigenvalue analysis, the active power sensitivity and the Linear Quadratic Regulator. Moreover, this approach adopts the H infinitive norm as a stability index for optimally allocating controllers.