This paper proposes a novel fault diagnosis method of a electrolytic capacitor used for DC-link voltage smoothing in adjustable speed drives. The equivalent series resistance (ESR) of the electrolytic capacitor is directly estimated from DC-link voltage and load currents and the status of the electrolytic capacitor is determined from the estimated ESR. To compensate the variation of the ESR owing to temperature variation, diodes are located on the same PCB near the capacitor and the temperature of the capacitor is sensed indirectly from the voltage drop of diodes. Simulation and experimental studies show the effectiveness of the proposed method.