It is commonly believed that observer-based compensation is an effective way for disturbance rejection. A less talked about fact is that such disturbance rejection control technique may also degrade control performance. In this article, we present a typical cross-coupling system to reveal this problem and, more importantly, propose a new design principle of conditional disturbance negation (CDN) to eliminate its potential drawbacks of disturbance observer-based compensation. Qualitative analysis is first given for a general form of such cross-coupling systems, indicating the necessity of CDN. The analysis and control design principle of CDN is then exemplified through two applications. A numerical linear application produces abundant quantitative results through the powerful transfer function and frequency domain tools. A more complex nonlinear flexible air-breathing hypersonic vehicle application shows how conventional compensation deteriorates the couplings between rigid and flexible modes, and validates the effectiveness of CDN through comprehensive model analysis and simulation results. The proposed CDN design principle also arouses awareness of the importance of: 1) understanding the characteristics of the plant to be controlled and 2) recognizing the critical role the information plays in engineering practice.