Inductive-capacitive-inductive (LCL)-type filters are currently preferred as a replacement for L-type filters in distributed generation (DG) power systems, due to their superior harmonic attenuation capability. However, the third-order dynamics introduced by LCL filters pose a challenge to design a satisfactory controller for such a system. Conventionally, an LCL-filtered grid-connected inverter can be effectively controlled by using a full-state feedback control. However, this control approach requires the measurement of all system state variables, which brings about more complexity for the inverter system. To address this issue, this paper presents a systematic procedure to design an observer-based integral state feedback control for a LCL-filtered grid-connected inverter in the discrete-time domain. The proposed control scheme consists of an integral state feedback controller and a full-state observer which uses the control input, grid-side currents, and grid voltages to predict all the system state variables. Therefore, only the grid-side current sensors and grid voltage sensors are required to implement the proposed control scheme. Due to the discrete-time integrator incorporated in the state feedback controller, the proposed control scheme ensures both the reference tracking and disturbance rejection performance of the inverter system in a practical and simple way. As a result, superior control performance can be achieved by using the reduced number of sensors, which significantly reduces the cost and complexity of the LCL-filtered grid-connected inverter system in DG applications. To verify the practical usefulness of the proposed control scheme, a 2 kW three-phase prototype grid-connected inverter has been constructed, and the proposed control system has been implemented based on 32-bit floating-point digital signal processor (DSP) TMS320F28335. The effectiveness of the proposed scheme is demonstrated through the comprehensive simulation and experimental results.