The state equation of five degrees of freedom rotor system suspended by AC hybrid magnetic bearings is given, and the approach to how to use linear quadratic method of optimal control theory to design a centralized and decentralized parameter controller is introduced. The simulation analysis between the centralized and decentralized parameter controllers is completed using MATLAB software. The digital control system based on TMS320F2812 DSP for AC magnetic bearings has been designed and tested using the decentralized control arithmetics. The research results have shown that the decentralized controller based on linear quadratic method meets performance requirements of AC magnetic bearing system, and has good control effect when the speed of the rotor runs under 30000 rpm.