This paper proposes a rigorous anomaly detection scheme, developed to spot power system operational changes which are inconsistent with the models used by operators. This novel technique relies on a state observer, with guaranteed estimation error convergence, suitable to be implemented in real time, and it has been developed to fully address this important issue in power systems. The proposed method is fitted to the highly nonlinear characteristics of the network, with the states of the nonlinear generator model being estimated by means of a linear time-varying estimation scheme. Given the reliance of the existing dynamic security assessment tools in industry on nominal power system models, the suggested methodology addresses cases when there is deviation from assumed system dynamics, enhancing operators’ awareness of system operation. It is based on a decision scheme relying on analytical computation of thresholds, not involving empirical criteria which are likely to introduce inaccurate outcomes. Since false-alarms are guaranteed to be absent, the proposed technique turns out to be very useful for system monitoring and control. The effectiveness of the anomaly detection algorithm is shown through detailed realistic case studies in two power system models.