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An adaptive observer with online estimation of rotor and stator resistances is considered for induction motors, while only one phase current is measured. Generally, an induction motor drive controller needs at least two phase-current sensors. Nevertheless, failure of one current sensor results in degradation of motor drive performance and reliability, and also state and parameter estimation errors. Furthermore, any controller or observer in induction motor drives should be robust to rotor and stator resistance variations. The proposed observer is capable of concurrent estimation of stator currents and rotor fluxes with online tuning of rotor and stator resistances, while rotor speed and only one phase current are available. Stability and convergence of the observer are analytically verified based on the partial stability theory. The observer equations and adaptation laws can be easily implemented, which makes it attractive for industrial development of fault tolerant drives. A complex programmable logic device is implemented for the experimental setup that controls an intelligent power module including insulated gate bipolar transistors. Extensive simulation and experimental tests verify the asymptotic convergence of the proposed observer.