In this paper a sensorless sliding-mode (SM) direct torque and flux control is described for three-phase induction motor (IM) drive. The IM drive is supplied with a two level space vector modulation (SVM) voltage source inverter. A conventional PI speed controller is employed to generate the desired torque command in the case of speed control. Stator and rotor flux vectors are estimated using a sliding-mode observer and are employed in rotor speed estimation. Moreover, the IM model includes the iron losses through a speed dependent shunt resistance in the motor two axis equivalent circuits. Motor efficiency is also optimized by adjusting the magnitude of the stator flux reference for each value of motor load and speed. For this purpose, an on-line search method (C)SM) is adopted. According to this method. for each given value of load torque and rotor speed, the stator flux reference is adjusted so that the average of real input power becomes minimized. Simulation and experimental results are presented to show the capability and validity of the proposed control scheme. (C) 2009 Elsevier Ltd. All rights reserved.