Speed and position sensors require the additional mounting space, reduce the reliability in harsh environments and increase the cost of motor. Various control algorithms have been proposed for the elimination of speed senor. This paper investigates a novel speed sensorless control of induction motor. The proposed control strategy is based on MRAS(Model Reference Adaptive System) using state observer as a reference model for flux estimation. This algorithm may overcome several shortages of conventional MRAS: integrator problems, small EMF at low speed and relatively large sensitivity to resistance variation. The proposed algorithm is verified through simulation and experiment.