The concept of using the actuators and sensors to form a self controlling and self monitoring smart system in advanced structural design has drawn considerable interest among the research community. The smart system has large number of active, light weight, distributed sensors and actuators either bonded or embedded in the structure for the purpose of vibration suppression, shape and acoustic controls as well as fault detection and mitigation. The present study addresses the issues related to the active vibration control schemes for the smart composite panels, with substrate as the fiber reinforced composite laminate and the piezo ceramic layers as the actuators and sensors, using LQR algorithm. The study involves the structural modelling, controller design, open and closed loop system response analysis. For this purpose, an eight noded isoparametric finite element with seven degrees of freedom, viz., three translations, two section rotations and two potential differences corresponding to the actuators and sensors is developed. The piezo-ceramic actuator and sensor layers are also considered as the load bearing components in the panel. The finite element equations are first transformed into the modal state space form and then are used to obtain the constant controller gains. These are used to obtain the closed loop responses.