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This paper proposes an optimal phasor measurement unit (PMU) placement model considering power system controlled islanding so that the power network remains observable under controlled islanding condition as well as normal operation condition. The optimization objectives of proposed model are to minimize the number of installed PMUs and to maximize the measurement redundancy. These two objectives are combined together with a weighting variable so that the optimal solution with minimum PMU number and maximum measurement redundancy would be obtained from the model. To reduce the number of required PMUs, the effect of zero-injection bus is considered and incorporated into the model. Furthermore, additional constraints for maintaining observability following single PMU failure or line loss are also derived. At last, several IEEE standard systems and the Polish 2383-bus system are …