Switched reluctance motors (SRMs) are rapidly becoming more popular in industrial applications where variable speed is required because of their simple construction, ease of maintenance, low cost and high efficiency. However, the operation of the SRM is heavily dependent upon precise information about rotor position, measurement of which may be very expensive or prohibited because of the nature of the application. The paper investigates the use of observer theory to eliminate the problems of having to measure the rotor position. For this purpose, observer algorithms based upon the extended Luenberger observer theory have been developed. These include plant nonlinearities which naturally lead to an estimator with improved performance over the existing estimation schemes. To verify the effectiveness of the proposed algorithm, both theoretical study and practical implementation were done and satisfactory results were obtained.