In this paper we present a case study involving mathematical modeling, system identification, and controller design of a two tank fluid level system. The case study is motivated by a realistic application of a two tank problem. We address some fundamental control oriented issues such as physical plant design and identification, transformation from discrete-time to continuous-time, and finally the controller design. We also introduce a novel physical system identification algorithm consisting of subspace identification, followed by a similarity transformation computation to extract the physical parameters of the system. The controller design is done by pole placement.