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The aim of this paper is to design and analyze reduced-order observers of the rotor flux of induction motors. The design is carried out in two steps. In the first step, a boundary of the stability region of the observation error is obtained corresponding to a chosen Lyapunov function. In the second step, the boundary is translated into a performance index that is minimized with respect to stator and rotor resistance variations and differences of voltages supplying the motor and those supplying the observer in order to obtain the largest stability region. Implementation of the observer on a low-cost fixed-point digital signal processor using look-up tables is described. Experimental results are shown with reference to a prototype consisting of a simple proportional-integral controller, the proposed observer, and a 2.2-kW induction motor; the implementations of both the controller and the observer are carried out on a DS1104 dSpace microcontroller using the fixed-point option.