In this paper, an improved version of the particle swarm optimization algorithm is proposed for the online tuning of power system stabilizers in a standard four-machine two-area power system to mitigate local and inter-area mode oscillations. Moreover, an innovative objective function is proposed for performing the optimization, which is a weight function of two functions. The first part of fitness is the function of the angular velocity deviation of the generators, and the other part is a function based on the percentage of undershoot and maximum overshoot, and also the damping time of the power system oscillations. The performance of the proposed stabilization method is compared with the genetic algorithm and bacteria foraging algorithm results. Simulations are made in three different power system operation conditions by changing the system load. The simulation results indicate the superiority of the proposed method over the genetic algorithm and bacteria foraging algorithm. In all the scenarios, power system oscillations are damped faster and with lower amplitude when the power system stabilizers coordinate with the proposed optimization method.