Transmission system operators are increasingly demanding that wind power plants (WPPs) contribute to enhance stability of power systems. When WPPs act as power system stabilizers(PSSs), the control and measured signals used to damp the oscillations may be located far away fromthe point where the oscillations are originated, typically at the synchronous generators. The use of only local measurements would imply a more robust system not requiring fast communication systems. The output signal used by the PSS in a WPP can be active or reactive power. The optimal combination of input and output to improve the system performance requires a detailed analysis. In this paper, a novel criterion to select input-output signals used by a PSS based on WPPs is presented. Unlike previous results, the proposed criterion considers explicitly local and remote signals in the analysis. Using fundamental design limitations and controllability and observability concepts, the criterion is able to identify the most adequate pair of input-output local signals without designing the controller. The application of the proposed selection criterion is illustrated in a three-synchronous-machine system with a WPP connected.