A now two-level algorithm is developed for the on-line optimal control of largo interconnected systems with fast dynamics. On the first level, independent optimization problems are solved for given ’ desired ’ output trajectories which are supplied by the second level. On the second level these ’ desired ’ output trajectories are iteratively improved. For ‘ Linear Quadratic ’ problems, the algorithm has a particularly simple form and for such systems a general purpose computer programme has been written for its implementation. A simple simulation study illustrates the approach.