This study presents the application of non-linear disturbance observer (NDO) for automatic generation control of interconnected thermal area power systems considering generation rate constraints. In this work, any change in electrical power arising in the system due to either load change or change in power output of intermittent renewable energy sources is called a disturbance. This disturbance is estimated using an NDO and the same is rejected by giving an equivalent command to the governor of thermal power units to maintain a power balance in the system; thereby maintaining frequency and tie-line power flows in each area of an interconnected power system. The analysis is presented on a two-area power system and it is shown that the proposed control scheme effectively mitigates any active power imbalance in the system not only for normal operations but also when there is large communication delay in the system. The key advantages of the proposed scheme not only include faster frequency and tie-line power control but also reduced control efforts as compared to other established control schemes. Furthermore, the proposed scheme requires the optimisation of only one control parameter in each area. Therefore, the scheme gives away the requirement of complex optimisation algorithms. © 2019 IET Generation, Transmission and Distribution. All rights reserved.