Direct torque control (DTC) of induction machines (IM) is a well-known strategy of these drives control which has a fast dynamic and a good tracking response. In this paper a nonlinear DTC of speed sensorless IM drives is presented which is based on input-output feedback linearization control theory. The IM model includes iron losses using a speed dependent shunt resistance which is determined through some effective experiments. A stator flux vector is estimated through a simple integrator based on stator voltage equations in the stationary frame. A novel method is introduced for DC offset compensation which is a major problem of AC machines, especially at low speeds. Rotor speed is also determined using a rotor flux sliding-mode (SM) observer which is capable of rotor flux space vector and rotor speed simultaneous estimation. In addition, stator and rotor resistances are estimated using a simple but effective recursive least squares (RLS) method combined with the so-called SM observer. The proposed control idea is experimentally implemented in real time using a FPGA board synchronized with a personal computer (PC). Simulation and experimental results are presented to show the capability and validity of the proposed control method.