This paper deals with sliding mode observer (SMO) for sensorless control of induction motor (IM) drive with anti-windup proportional integral (AWPI) speed controller. By using PI speed controller with its output variables saturated, a wind-up phenomenon and an unstable response often occur especially for sensorless electric motor drive. In order to improve a high performance SMO sensorless vector controlled induction motor drive, we use an anti-windup action included in the PI controller inner speed loop. The proposed scheme is implemented on a digital signal processor (DSP) using a dSpace DS1104 controller board. Experimental results are presented to show the effectiveness of the algorithm with smoothly and stably response.