This paper aims at achieving real-time optimal speed estimation for an induction motor using the Extended Kalman filter (EKF). Speed estimation is essential for fault diagnosis in Motor Current Signature Analysis (MCSA). The estimation accuracy is obtained by exploring the noise covariance matrices estimation of the EKF algorithm. The noise covariance matrices are determined using a modified subspace model identification approach. In order to reach this goal, this method compares an estimated model of a deterministic system, derived from available input–output datasets (using voltage–current sensors), with the discrete-time state-space representation used in the Kalman filter equations. This comparison leads to the determination of model uncertainties, which are subsequently represented as noise covariance matrices. Based on the fifth-order nonlinear model of the induction motor, the rotor speed is estimated with the optimized EKF algorithm, and the algorithm is tested experimentally.