This paper considers a design method of filtered inverse systems for time-invariant systems, which reproduce the input signal to the system approximately. The inverse system must be stable in practical applications. It is well known that the inverse system is unstable if the system has invariant zeros in the closed right half plane. Yamada and Watanabe presented a state space design method of stable filtered inverse systems for strictly proper systems with some right half plane invariant zeros. However, the series connected system with the system and filtered inverse system is not always diagonal rational function. The purpose of this paper is to give a state space design method of stable filtered inverse systems such that the series connected system with the system and stable filtered inverse system is a diagonal rational function. We construct preliminary the filtered inverse system by usual method and factorize the filtered inverse systems to several subsystems. The stable filtered inverse system is obtained using observer design for subsystems of the filtered inverse system. Numerical example is illustrated to demonstrait the effectiveness of the proposed method. Finally, an application of the stable filtered inverse systems is presented.