In this paper, we propose a design method of hierarchical distributed controllers for networked linear systems. The hierarchical distributed controller has an advantage that an L2-performance of the closed-loop system improves as improving a performance of local controllers that stabilize disjoint subsystems individually. Towards systematic design, we utilize state-space expansion that enables us to deal with the state variables associated with disjoint subsystems and those associated with interference among hierarchically clustered subsystems in a tractable manner. Moreover, by the integration of a hierarchical distributed observer having good compatibility with the structured controller, we build a framework to implement an observer-based hierarchical distributed control. The efficiency of the proposed control system is shown through an example of power networks.