A semiactive control of vehicle suspension system with ER damper is presented. A quarter tracked vehicle model with ER damper is constructed. Its motion equation and state space form for the suspension system are derived. The shear mode ER damper is analyzed and is used as actuator for the system. The linear quadratic Gaussian stochastic optimal control theory is applied to the control system. Weighted quadratic performance index related to the body acceleration, the suspension working space and the tyre dynamic displacement is used to design the LQG controller. Simulation results show that,compared with the passive one,the LQG control can reduce the vertical acceleration effectively and the suspension working space can be fully used with the same tyre dynamic displacement. The ride comfort performance and handling stability are both improved.