Information of the lateral velocity and the sideslip angle in a vehicle is very useful in many active vehicle safety applications such as yaw stability control and rollover prevention. Because cost-effective sensors to measure the lateral velocity and the sideslip angle are not available, reliable algorithms to estimation them are necessary. In this paper, a sliding mode observer is designed to estimate the lateral velocity. The side slip angle is estimated using the recursive least square with the disturbance observer and the pseudo integral. The estimated parameters from the combined estimation method are updated recursively to minimize the discrepancy between the model and the physical plant, and any possible effects caused by disturbances. The performance of the proposed monitoring system is evaluated through simulations and experiments.