A sensorless rotor position estimation and speed control of three-phase radial flux surface-mounted permanent magnet synchronous machine (SMPMSM) is presented. A novel thermoelectric physics-based modeling approach was developed to evaluate more realistic information about the instantaneous behavior of the machine during operation. The extracted information from the physics-based models is employed in the back electromotive force observer. The mathematical modeling, stability, and transient analysis of the observer are developed and described in detail. The sensorless operation of a 0.2-kW SMPMSM was verified numerically and experimentally for medium low, low, and very low speeds at different operational contingencies. The results show that, in spite of significant machine model variations and increased noise level especially at very low speeds, the accuracy of estimated speed and rotor position using the developed observer is acceptable.