In this paper, a network-based gait rehabilitation system is proposed for enhanced mobility and tele-rehabilitation. In the proposed rehabilitation system, a compact rotary elastic actuator (cRSEA) is employed to provide assistive torque to the patients and it is controlled over a local wireless network. However, time delay exists in both sensor-controller and controller-actuator channels, which leads to performance degradation and even destabilization. Moreover, the amount of time delay is time-varying and it is difficult to measure accurately. In order to compensate the time delay and guarantee stability of the system, a communication disturbance observer (CDOB) is designed in the discrete-time domain. Parameters are tuned based on the linear quadratic regulator (LQR) design technique and compared to other parameter choices in the frequency domain in terms of closed-loop stability, tracking performance, disturbance attenuation, and noise cancellation. Simulation and experimental results are shown to validate the performance of the proposed controller.