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This brief presents a nonlinear observer for estimating the longitudinal and lateral velocities based on Dugoff's tire model and vehicle dynamics. The observer has a fixed gain structure and can make full use of information about acceleration measurements and nonlinear vehicle model. A sufficient condition is derived to guarantee the stability of the observer, and the robustness of the observer with respect to additive disturbances is analyzed with the help of input-to-state stability theory. The performance of the observer is compared with that of existing approaches and evaluated experimentally under a variety of maneuvers and road conditions.