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Permanent-magnet synchronous generators (PMSGs) are commonly used for small variable-speed wind turbines to produce high-efficiency, high-reliability, and low-cost wind power generation. This paper proposes a novel control scheme for an interior PMSG (IPMSG) driven by a wind turbine, in which the d-axis and q-axis stator-current components are optimally controlled to achieve the maximum wind power generation and loss minimization of the IPMSG. The effect of magnetic saturation, which causes the highly nonlinear characteristics of the IPMSG, is considered in the control-scheme design. The optimal d-axis stator-current command is obtained as a function of the IPMSG rotor speed by solving a constrained nonlinear-optimization problem that minimizes the copper and core losses of the IPMSG. At any wind speed within the operating range, the IPMSG rotor speed is optimally controlled to extract maximum wind power. The optimal q-axis stator-current command is then obtained from the optimal IPMSG rotor speed and d-axis current. To eliminate the effects of nonlinearity caused by magnetic saturation, an input-output feedback linearization technique is applied to design the high-performance nonlinear current controllers. The proposed control scheme provides the wind generation system with the maximum efficiency and high dynamic performance.