This paper presents an improved method for high-resolution rotor position estimation in the permanent magnet synchronous motor (PMSM) drives with low-resolution Hall-effect sensors. The proposed method adopts a gain-scheduled full-order speed observer. Since the quantized position signal, which is obtained from Hall-effect sensors, is basically used as the input of the observer, the sixth-order harmonics are essentially included in the estimated position. To eliminate the harmonic components, the quantized position is linearized by a linear extrapolation based on the estimated average speed and futhermore the speed-depentent observer gain scheduling strategy is developed. The observer gain is also scheduled by considering the motor acceleration to improve the dynamic performance according to the changes of the motor speed and load. Several experiments are performed for 800W PMSM drive and the results demonstrate the effectiveness of the proposed method.