This paper presents an air-gap torque (AGT)-based method for efficiency estimation of induction motors. A new concept of stator resistance that includes the mechanical losses effect is proposed. This new stator resistance is estimated through a particle swarm optimization approach based on the stator flux equations and minimization of torque error at the rated operation point. Then, the obtained stator resistance is used in the AGT equations to estimate the shaft torque and then the efficiency. Moreover, the rotor speed is estimated using induction motor current signature analysis. Thus, the proposed methodology for induction motor efficiency estimation relies only on line currents, line voltages, and nameplate data, being appropriate for in-service applications. Finally, the simulation and experimental results are presented to validate the proposed method at different load conditions.