This paper proposes a new compensation algorithm for stator resistance that is crucial for improving the direct vector control performance of an induction motor. This algorithm is based on the flux estimator that is derived from the stator voltage equation. Since a flux estimator is dependent on the stator resistance, a flux error originates from the variation of the stator resistance. This parameter mismatch in the estimator thereafter affects the flux and torque response. Accordingly, a new compensator has been designed to offset this degradation in the responses. The proposed compensator is very simple to implement and does not require any modifications to the motor model or any special interruptions of the controller. The value of the stator resistance is attained in real time through measuring the terminal voltage and current. The effectiveness of the proposed scheme has been confirmed through both simulation and experimentation.