The present research concentrates on the performance improvement of a two-stage proportional valve with internal hydraulic position feedback which is named as the Valvistor valve. In this paper, the performance constraint of this valve is identified and a novel electronic closed-loop control strategy with an integral-separation fuzzy proportional-integral-derivative controller is proposed to improve the valve performance, including the static characteristics and the dynamic characteristics. The results show that in the Valvistor valve, the comparison point and the feedback loop for the internal hydraulic position feedback is only in the main stage, while the input is in the pilot stage. This leads to the poor performance of this valve. The control strategy is very effective and the performance of the Valvistor valve is improved. With the control strategy, the error of the poppet displacement is reduced from 4.9% to 2.1% by adjusting the spool displacement in the pilot stage in real-time and the flow error is reduced from 5.3% to 2.3%. The dead zone of the poppet displacement and the flow is eliminated. The hysteresis is reduced from 5.3% to 2.6% and the linearity is improved. The overshoot is reduced from 0.06 to 0.02 mm and the settling time is reduced from 0.5 to 0.2 s. Moreover, the bandwidth is increased from 8 to 16 Hz.