there has been a growing concern over energy consumption since the past decade mainly because of the soaring cost of energy and tight environmental laws and regulations. in this thesis a model based efficiency optimization for speed control of interior permanent magnet synchronous motor (ipmsm) is proposed to improve the efficiency of the motor drive which usually operates at different load and speed conditions. recently, the ipmsm has been becoming popular due to some of its advantages such as high efficiency, high power density, low noise and robustness as compared to the conventional induction and other ac motors. thus, the ipmsm is considered in this work. the proposed energy optimization algorithm is developed based on motor model. in order to minimize the controllable losses, the air gap flux level should be optimized. in an lpmsm the flux level can only be optimized by controlling the d-axis armature current as the field flux is supplied by the rotor permanent magnet. for the proposed work the vector control technique is used in order to achieve fast and accurate speed response, quick recovery of speed from any disturbance and insensitivity to parameter variations etc. a simulation model for the complete closed loop vector control of ipmsm incorporating the proposed energy optimization algorithm has been developed using matlab/simulink software. the performance of the drive has been tested extensively for different dynamic operating conditions such as sudden load, command speed and parameter changes. an efficiency gain of about 4% is obtained from the proposed optimization algorithm from simulation. after the satisfactory simulation results are found a realtime implementation of the complete drive system using dsp board (ds1104) for a laboratory 5 hp motor performed and the real time responses confirms with the simulation results as expected.