In this paper we examine the problem of internally stabilizing, and simultaneously diagonally decoupling, a linear multivariable system by two-parameter compensation. Based on our earlier results (Boussaïd and Guérin 1996) we prove that any given plant (P) of full row rank can be decoupled with stability by the considered configuration. Computation of the decoupling compensators follows by easy constructions. The decoupling problem with a minimum number of unstable zeros in the decoupled system is also formulated and solved in the ‘generic‘ case.