Unstable time-delay systems and recycling systems are challenging problems for control analysis and design. When an unstable time-delay system has a recycle, its control problem becomes even more difficult. A control methodology for this class of systems is proposed in this paper. The considered strategy is based on the fact that if some internal system signals are available for measurement, then it will be possible to decouple the backward dynamics of the system and then a feedback controller could be designed for the forward dynamics. The key point for this strategy to be carried out is an asymptotic observer-predictor proposed to estimate these required internal signals. Necessary and sufficient conditions to assure convergence of this observer are given. After proving that the proposed control scheme tracks a step input signal and at the same time reject step disturbances, a procedure summarizing the methodology is provided. Robustness with respect to delay uncertainty and model parameters are also analyzed. (C) 2012 Elsevier Ltd. All rights reserved.