In this paper, we investigate the stability of Takagi-Sugeno fuzzy-model-based (FMB) functional observer-control system. When system states are not measurable for state-feedback control, a fuzzy functional observer is designed to directly estimate the control input instead of the system states. Although the fuzzy functional observer can reduce the order of the observer, it leads to a number of observer gains to be determined. Therefore, a new form of fuzzy functional observer is proposed to facilitate the stability analysis such that the observer gains can be numerically obtained and the stability can be guaranteed simultaneously. The proposed form is also in favor of applying separation principle to separately design the fuzzy controller and the fuzzy functional observer. To design the fuzzy controller with the consideration of system stability, higher order derivatives of Lyapunov function (HODLF) are employed to reduce the conservativeness of stability conditions. The HODLF generalizes the commonly used first-order derivative. By exploiting the properties of membership functions and the dynamics of the FMB control system, convex and relaxed stability conditions can be derived. Simulation examples are provided to show the relaxation of the proposed stability conditions and the feasibility of designed fuzzy functional observer-controller.