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In this paper, an improved sensorless control algorithm for a variable speed constant frequency doubly fed induction generator is presented. Unlike previously reported methods the proposed algorithm does not require the rotor position or speed information for the stator field orientation of the rotor variables. The slip frequency is estimated by a reactive power-based model reference adaptive observer and is used in the rotor current controllers for back emf compensation. A new on-line estimation method for the magnetizing inductance of the machine is also proposed to enhance the performance of the controller. Small-signal models of the slip frequency and the magnetizing inductance estimators are developed to aid their design. The proposed algorithm is capable of “speed catching on the fly” and performs satisfactorily with balanced, unbalanced, linear, and nonlinear loads (in any combination) particularly, nonlinear unbalanced loads, which has not been reported in the literature so far. Experimental and simulation results are presented to demonstrate an excellent load voltage regulation property of the control algorithm during severe transient operating conditions. Total harmonic distortion and unbalance of the load voltage and stator current even with large nonlinear/unbalanced loads are also found to be much smaller compared to systems reported earlier.