The authors have constructed a magnetic domain observation system for grain-oriented electrical steel sheet using a magnetic optical sensor. The system uses a camera, coaxial illumination and a polarizer, and observation can be performed simply by placing the sensor on the sample surface. No processing of the sample, such as insulating coating removal, is required. In this paper, we will report the results of magnetic domain observation of grain-oriented electrical steel sheet and the changes in magnetic domains under DC excitation in arbitrary direction combined with a magnetizer by generating contrast images using Otsu's method of magnetic domain images obtained with the constructed system.