A novel method based on a combination of the Extended Kalman Filter (EKF) with Particle Swarm Optimization (PSO) to estimate the speed and rotor flux of an induction motor driveis presented. The proposed method will be performed in two steps. As a first step, the covariance matrices of state noise and measurement noise will be optimized in an off-line manner by the PSO algorithm. As a second step, the optimal values of the above covariance matrices are injected in our speed-rotor flux estimation loop (on-line).Computer simulations of the speed and rotor-flux estimation have been performed in order to investigate the effectiveness of the proposed method. Simulations and comparison with genetic algorithms (GAs) show that the results are very encouraging and achieve good performances.