In this paper, stator resistance estimation for a speed sensorless vector controlled induction motor drive taking saturation into account is presented. A mathematical dynamic model of an induction motor as influenced by magnetic circuit saturation is presented. Moreover, a modified structure of indirect vector controller scheme is proposed which involves the saturated value of the magnetizing inductance. Parallel stator resistance and rotor speed estimation based on model reference adaptive system (MRAS) has been used to obtain accurate estimation for rotor speed. On-line magnetizing inductance estimation has been used within the speed estimator. Digital simulations have been carried out in order to evaluate the effectiveness of the proposed sensorless drive system. The results prove excellent steady-state and dynamic performances of the drive system in a wide speed range, which confirms validity of the proposed scheme