This paper is concerned with the stability analysis of encrypted observer-based control for linear continuous-time systems. Since conventional encryption has limited ability to deploy in continuous-time integral computation, our work presents systematically a new design of encryption for a continuous-time observer-based control scheme. To be specific, in this paper, both control parameters and signals are encrypted by the learning-with-errors (LWE) encryption to avoid data eavesdropping. Furthermore, we propose encrypted computations for the observer-based controller based on its discrete-time model, and present a continuous-time virtual dynamics of the controller for further stability analysis. Accordingly, we present novel stability criteria by introducing linear matrix inequalities (LMIs)-based conditions associated with quantization gains and sampling intervals. The established stability criteria with theoretical proofs based on a discontinuous Lyapunov functional possibly provide a way to select quantization gains and sampling intervals to guarantee the stability of the closed-loop system. Numerical results on DC motor control corresponding to several quantization gains and sampling intervals demonstrate the validity of our method.