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A novel control strategy for the operation of a permanent magnet synchronous generator (PMSG) based stand alone variable speed wind turbine is presented in this paper. The direct drive PMSG is connected to the load through a switch mode rectifier and a vector controlled pulse width modulated (PWM) IGBT-inverter. The generator side switch mode rectifier is controlled to achieve maximum power from the wind. The load side PWM inverter is using a relatively complex vector control scheme to control the amplitude and frequency of the inverter output voltage. As there is no grid in a stand-alone system, the output voltage has to be controlled in terms of amplitude and frequency. The stand alone control is featured with output voltage and frequency controller capable of handling variable load. A damp resistor controller is used to dissipate excess power during fault or over-generation. The potential excess of power will be dissipated in the damp resistor with the chopper control and the dc link voltage will be maintained. Extensive simulations have been performed using Matlab/Simpower. Simulation results show that the controllers can extract maximum power and regulate the voltage and frequency under varying load condition. The controller performs very well during dynamic and steady state condition.