High performance induction motor drives are driven by two advanced control methods: vector control and direct torque control (DTC). In order to apply the control methods to the speed/position control systems, the informations on rotor speed and rotor or stator flux are required. The speed is measured by encoder, and the rotor or stator flux is estimated by using the motor parameters and measured currents. The control input generated on the basis of the information that is provided by abnormal sensors should be far from the desired value and deteriorates the overall control perfonnance. In this paper, the effects of sensor faults on the motor variables and the control performance of induction motor drives are analyzed by both theoretical approach and simulation study. The presented analysis results could be utilized for the purpose of developing a fault detection and isolation scheme in induction motor drives.