The article's goals are to illustrate the feasibility of implementing a Takagi Sugeno state observer on an embedded microcontroller based platform and secondly to present a methodology for validating a physical embedded system using a Hardware In The Loop architecture, where a simulation software replaces the process. As an application, a three water tank system was chosen. For the validation part, LMS AMESim software is employed to reproduce the process behaviour. The interface to the embedded platform is assured by Simulink on a Windows operating system, chosen as it is the most commonly used operating system. The lack of real time behaviour of the operating system is compensated by a real time kernel that manages to offer deterministic response times. The Takagi-Sugeno observer in the case of this process has the complex form that considers the premise variables to be unmeasurable. The embedded system consists of two Arduino boards connected in parallel, thus offering distributed resources.