AC induction motors and permanent magnet synchronous drives became very popular for motion control applications due to their simple and reliable construction. Sensorless drive control is required in many applications to reduce drive production costs. While many approaches to magnetic flux, rotor speed, or other quantities needed to control electrical machine were proposed, conditions under which these quantities can be estimated are not often sufficiently investigated. In this paper, induction machine and permanent-magnet-synchronous-machine drive state observability analysis is presented, together with conditions allowing reliable rotor speed and position estimation. A method based on the nonlinear dynamical system state observability theory is proposed, resulting in a unified approach to the ac drive observability analysis.