In digital current mode controlled DC-DC converters, conventional current sensors might not provide isolation at a minimized price, power loss and size. Therefore, a current observer which can be realized based on the digital circuit itself, is a possible substitute. However, the observed current may diverge due to the parasitic resistors and the forward conduction voltage of the diode. Moreover, the divergence of the observed current will cause steady state errors in the output voltage. In this paper, an optimal current observer is proposed. It achieves the highest observation accuracy by compensating for all the known parasitic parameters. By employing the optimal current observer-based predictive current controller, a buck converter is implemented. The converter has a convergently and accurately observed inductor current, and shows preferable transient response than the conventional voltage mode controlled converter. Besides, costs, power loss and size are minimized since the strategy requires no additional hardware for current sensing. The effectiveness of the proposed optimal current observer is demonstrated experimentally.