A design methodology is presented for dynamical observers of hybrid systems with linear continuous-time dynamics that reconstructs the complete state (discrete location and continuous state) from the knowledge of the inputs and outputs of a hybrid plant. We then present the application of the theory to the problem of on-line identification of the actual engaged gear for a car. The performance of the observer was tested with experimental data obtained in a Magneti Marelli Powertrain using an Opel Astra equipped with a Diesel engine. (C) 2013 Elsevier Ltd. All rights reserved.