In literature it is conjectured that the states of the generalized Lorenz system with an unknown parameter can not be estimated by adaptive observers. In this paper we show that this unknown parameter and the states can actually be estimated simultaneously by some kind of adaptive observer. The proof is obtained by constructing some exponential observer to achieve chaotic synchronization for the generalized Lorenz system. The result implies that more work needs to be done to apply generalized Lorenz system in secure communication.