Point wind velocity measurement given by nacelle-top mounted sensor may not be same as effective wind velocity, which strikes the wind turbine rotor blades. This article proposes a new method for the computation of effective wind velocity by inverting the turbine's aerodynamic model after estimating the turbine torque and its rotor speed. Nonlinear control theory-based sliding mode observers are used to estimate the wind turbine generator induced speed emfs, rotor speed, and aerodynamic torque imparted to generator shaft. While satisfying the Lyapunov inequality condition, design aspects of sliding mode observers are discussed in detail. The performance of the proposed wind velocity estimation method is evaluated by using permanent magnet synchronous generator-based wind turbine emulator in laboratory. Simulation and experimental studies confirm that the estimated wind velocity under different wind profile conditions is accurate and can be used in various control algorithms in wind energy conversion systems. © 1972-2012 IEEE.