This paper develops a modified optimization procedure for coordination of a power system stabilizer (PSS) and a thyristor controlled series compensator (TCSC) controller to enhance the power system small signal stability. The new approach employs eigenvalue-based and time-domain simulation based objective functions simultaneously to improve the optimization convergence rate. A modified particle swarm optimization (MPSO) algorithm is used as the optimization algorithm. The results of simulations and eigenvalue analysis for a single machine infinite bus (SMIB) system equipped with the proposed PSS and TCSC controllers confirm that the new approach is effective in enhancing the system stability.