This paper proposes the combination of tensor product (TP)-based model transformation and of fuzzy control as a cost effective cascade control system (CS) structure. A novel two-step design approach is suggested. A parallel distributed compensation technique is used in the first step in the TP-based design of the inner state feedback control loops which is next characterized by simple models using equivalent state feedback matrices. The modulus optimum method and the modal equivalent principle are used in the second step to design the Mamdani PI-fuzzy controller in the outer control loops. The cost effective feature of the original cascade CS combination concerns the simplicity of the CS structure, of the controllers and of the design approach. The presentation is focused on the level control in horizontal three tank systems where two cascade CS structures are separately designed to control two water levels. The efficiency of the cascade CS structure is proved by real-time experimental results for a laboratory three tank system. Comparisons with the Mamdani PI-fuzzy CS and with the cascade combination of TP and PI CS are included. 38 8 8 8 8 8 8 3 8 91 Fig. 7. Real-time response of cascade combination of TP and fuzzy control system structure with respect to reference and disturbance inputs: level h3 versus time.