This paper presents an observer-based tension feedback controller for a direct drive web transport system. A PI-type closed-loop torque observer (PICTO) is developed to estimate the external load torque acting on the unwind roll. The observed web tension is then calculated on the basis of this torque estimate and the unwind radius. The proposed observer facilitates the closed-loop control of the web tension without the need for a tension meter. Using a DSP-based experimental system, the performance of the proposed controller is compared with the results obtained using two conventional tension controllers. The experimental results confirm the effectiveness of the proposed observed-based tension feedback controller.