A terminal sliding mode controller with nonlinear disturbance observer is investigated to control mobile wheeled inverted pendulum system. In order to eliminate the main drawback of the sliding mode control, “chattering” phenomenon, and for compensation of the model uncertainties and external disturbance, we designed a nonlinear disturbance observer of the mobile wheeled inverted pendulum system. Based on the nonlinear disturbance observer, a terminal sliding mode controller is also proposed. The stability of the closed-loop mobile wheeled inverted pendulum system is proved by Lyapunov theorem. Simulation results show that the terminal sliding mode controller with nonlinear disturbance observer can eliminate the “chattering” phenomenon, improve the control precision, and suppress the effects of external disturbance and model uncertainties effectively.