The paper presents an accurate loss model based controller of an induction motor to calculate the optimal air gap flux. The model includes copper losses, iron losses, harmonic losses, friction and windage losses, and stray losses. These losses are represented as a function of the air gap flux. By using the calculated optimal air gap flux compared with rated flux for speed sensorless indirect vector controlled induction motor, an improvement in motor efficiency is achieved. The motor speed performance is improved using a fuzzy logic speed controller instead of a PI controller. The fuzzy logic speed controller was simulated using the fuzzy control interface block of MATLAB/SIMULINK program. The control algorithm is experimentally tested within a PC under RTAI-Linux. The simulation and experimental results show the improvement in motor efficiency and speed performance.