This paper presents the dynamical modeling and nonlinear controller design of inverted pendulum-wheeled cart systems. The controller is a nonlinear observer-based compensator with linear feedback gains. Using a linearized model, the linear feedback gains were determined according to HINF and H2 control theories. A Luenberger-like nonlinear observer was designed to estimate the unmeasured variables required for control. The performance of the proposed controller was experimentally verified. It was found that the nonlinear controller is able to stabilize the pendulum in a short period of time. Also the controller with HINF requires shorter range of variations of pendulum angle and cart displacement than the controller with H2 gains.