Abstract: This study proposes a novel method to achieve good performance for rotor time constant and flux estimation in induction motor sensorless control, using a reduced order Extended Kalman Filter (EKF) instead of a full-order EKF. This new algorithm uses a reduced order state-space model that is discretized in a particular and innovative way proposed in this study. With this model structure, only the rotor flux components are estimated while the full order EKF also estimates stator current components. Thus, as compared with the full order EKF, this new approach strongly reduces the execution time of the observation and simplifies the tuning of covariance matrices, since, the number of elements to be adjusted is reduced. The satisfying simulations results on Matlab-Simulink environment for a 1.8 kW induction motor, demonstrate the good performance and stability of the proposed reduced order EKF algorithm against parameter variation, modeling uncertainty, measurement and system noises.