Abstract: Forced oscillations are mainly caused by oscillation sources of generators. The fundamental way to eliminate the forced oscillation is to locate the oscillation source generator and remove it. A method based on differentiated design of observer signal sensitivity is proposed to locate the oscillation source. According to the H_-/H_∞ norm of the transfer function matrix, the inequality constraints are given which assign different sensitivities of observer residual signal to oscillation sources inside and outside the generator using the generalized KYP lemma. Linear matrix inequality is used to optimize and search the feedback matrix of the observer, so that the observer residual signal is sensitive to the oscillation sources inside the generator while insensitive to the forced oscillation sources from the power grid outside the generator. The oscillation source generator could then be located according to the spectrums of the observer residuals of different generators. The demonstrative examples of a 39-bus system and the North China Power Grid show the effectiveness, intuitiveness and robustness of the location method.