In order to increase the accuracy of the current control loop, usually, well known parameter compensation and/or cross decoupling techniques are employed for advanced ac drives. In this paper, instead of using these techniques an observer-based current controller is proposed for vector controlled induction motor (IM) drives. The control design, based on synchronously rotating d-q frame model of the machine, has a simple structure that combines the proportional portion of a conventional PI control and output of the observer. The observer is predicted to estimate the disturbances caused by parameters change in current control loop and, also to remove undesired cross coupling existing between components of the stator current. The observer uses the measured stator currents and estimated PWM voltages, and produces a disturbance signal with a low pass filter. The proposed control scheme reduces cross coupling effects and increase robustness against parameters change without requiring any other compensation strategies. The experimental implementation results are provided to demonstrate validity and performance of the proposed control scheme.