A new system modeling method with respect to time delayed power systems is proposed, and then a two-layer controller of wide-area inter-area supplementary damping control is designed to overcome the negative effects on closed loop power system stability induced by time-delay of measured wide-area signals. The time delay system control theory can be directly applied through the modeling method. In the first layer, the time delay output feedback control is applied to power system without time delay to form the time delayed closed-loop system. In the second layer, the feedback control aiming at the time delayed system model is carried out. The state feedback matrix and observer gain matrix are solved by the LMI method based on the control theory of time delay system. The simulation of 10-machine 39-bus New England test system proves the damping controller based on the two-layer control strategy is insensitive to time delay to some extent with strong robustness and has better effect on suppressing the inner-area oscillation. The method proposed builds a platform and provides feasibility to apply the control theory of time delayed system directly in the design of damping control in power system.