This paper presents an application of the circle criterion to design a nonlinear observer for induction motor conditions monitoring. In order to estimate unmeasurable state variables that are essential to monitor the considered induction motor a nonlinear observer is designed. Observer gain matrices are computed by solving linear matrix inequalities (LMI) to satisfy the Lyapunov stability conditions for the estimation error with respect to circle criterion. The obtained simulation results show the effectiveness of the proposed approach for induction motor conditions monitoring.