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This paper presents an improved direct torque control (DTC) method for sensorless matrix converter drives using a multi-mode indirect space vector modulation (ISVM) and an adaptive sliding mode observer. The drive system is characterized by reduced torque and flux ripples, unity input power factor, sinusoidal input/output waveforms and good sensorless control performance over a wide speed range, while maintaining constant switching frequency and fast dynamic. Independent control of both torque and flux is achieved by two PI controllers. To preserve the DTC transient merits, the ISVM is switched to an overmodulation mode when the reference voltage exceeds the saturation point of PI controllers. When the voltage reference is lower than 30% of the allowable value, the modified input current vector modulation, utilizing medium line-to-line voltages, is employed to improve the steady-state performance at low speeds.