A direct torque control algorithm for 3-level inverter-fed induction motors is presented. Conventional voltage selection methods provoke some problems such as stator flux drooping phenomenon and undersirable torque control appeared especially at the low speed operation. To overcome these problems, a proposed method uses intermediate voltage vectors, which are inherently generated in 3-level inverters. In the proposed algorithm, both subdivision of the basic switching sectors and applications of tntermediated voltages improve the low speed operation characteristics. This algorithm basically considers applications in which direct torque controlled induction motors are fed by 3-level inverters with low switching frequency around 500Hz. An adaptive observer is also employed to bring better responses at the low speed operation, by estimating some state-variables, motor speed and motor parameters which take a deep effect on the performance of the low speed operation. Simulation and experiment results verify effectiveness of the proposed algorithm.