This paper addresses observer-based optimal zero-sliding midcourse guidance for missiles with thrust vector control (TVC) and a divert control system (DCS) for the interception of a theater ballistic missile. First, a three degree-of-freedom observer-based optimal zero-sliding midcourse guidance law is designed to minimize the control effort and to narrow the distance between the missile and the target. Then, the exponential stability of the overall system is analyzed thoroughly via the Lyapunov stability theory. Finally, successful simulations are developed to verify the effectiveness of the proposed guidance law.