This paper presents a new approach to induction motor (IM) speed controller design with indirect field-oriented control structure. The designed discrete-time variable structure (VS) speed controller uses elements of reduced-order and full-order (integral) sliding mode (SM) control, and acts as a nonlinear equivalent of conventional PI control. The controlled plant is approximated by a first-order dynamical model. Therefore, the proposed approach leads to an output feedback-based SM control (SMC) system. To improve its disturbances rejection and tracking capability, the controller is supplied with a first-order disturbance compensator based on the switching function measurement. The proposed VS control structure provides a high-performance chattering-free discrete-time SMC system. Numerous experiments have been carried out to test the proposed control method and to compare its performance with the conventional PI control approach. The experimental results demonstrate high tracking accuracy and robustness of the proposed system.