The observability of AC-DC system is analyzed based on the solvable condition of power flow. Each converter station in DC system is considered as a unit to overcome the difficulty in merging and extending observable islands， when DC system is not observable as a whole but some converter stations of it are still observable. It is pointed out that AC voltage magnitude and injection measurements in the boundary nodes of AC system and DC system are coupling variables， and the interaction between AC system and DC system is discussed in detail. Combining with the DC correlation coefficient and the presented disposing rules， a new algorithm for AC-DC system observability analysis is proposed. Numeric test shows that the proposed algorithm is valid and efficient， and the influence of DC line on the convergence of AC-DC system state estimation is also presented.