It is proposed a new compensation method in the rotor time constant of indirect vector controlled induction motor. The proposed scheme is an on-line method using the stator current error that is the difference between current command and estimated current calculated from terminal voltages and currents. As the current error becomes to zero, the rotor time constant in the vector controller approaches the real value. The proposed method shows good performances in the transient region as well as in the steady state region regardless of load torque variation, and it is verified by the computer simulation using SIMULINK in Matlab.