In this paper, a novel control algorithm to minimize the power loss of the induction generator for wind power generation system is presented. The proposed method is based on the flux level reduction, where the flux level is computed from the machine model for the optimum d-axis current of the generator. For the vector-controlled induction generator, the d-axis current controls the excitation level in order to minimize the generator loss while the q-axis current controls the generator torque, by which the speed of the induction generator is controlled according to the variation of the wind speed in order to produce the maximum output power. Wind turbine simulator has been implemented in laboratory to validate the theoretical development. The experimental results show that the loss minimization process is more effective at low wind speed and that the percent of power loss saving can approach to 25%. Experimental results are shown to verify the validity of the proposed scheme.