In this study, in order to improve dynamic performance of variable speed Permanent Magnet Synchronous Generator (PMSG) drive system and obtain a speed (mechanic) sensorless operation, a second order sliding mode controller together with a hybrid observer are proposed. In the presence of instantaneous speed change and disturbance effects such as parameter and load torque deviations, it is aimed at developing a robust speed response against all uncertainties without using a mechanical sensor in the drive system. In controlling PMSG, a second order sliding mode observer and a simple Kalman Filter, hybrid structure, are utilized in view of their simple observer-controller structure. Thanks to this the structure, chattering effect, one of the important disadvantages of classical sliding mode observer-controller structure, is reduced and a good dynamic speed response is yielded in variable speed operation. Results are compared to classical sliding mode and differences between the hybrid observer-controller and the classical system are revealed.