The observer-based decentralized control problem is investigated for a class of uncertain interconnected systems of neutral type. Using the singular value decomposition approach, a full-order observer is designed to guarantee the asymptotic stability of the error dynamic system. A novel mathematical technique is developed to solve this design problem. Sufficient condition for uncertain interconnected systems of neutral type to be asymptotic stable is established based on the singular value decomposition method. Furthermore, the desired gains of observer and controller are obtained by the explicit expressions in terms of some free parameters. Finally, an illustrative example is used to demonstrate the proposed approach, and the corresponding simulation results are given to elucidate the effectiveness.