This paper presents the design of an observer-based stabilizing controller for linear discrete-time systems subject to interval time-varying state-delay. In this work, the problem has been formulated in convex optimization framework by constructing a new Lyapunov–Krasovskii (LK) functional to derive delay-dependent stabilization criteria. The summation inequality and the extended reciprocally convex inequality are exploited to obtain a less conservative delay upper bound in linear matrix inequality (LMI) framework. The derived stability conditions are delay-dependent and thus ensure global asymptotic stability in presence of any time-delay less than the obtained delay upper bound. Numerical examples are included to demonstrate the usefulness of the developed results.