This paper presents the development of an adaptive fuzzy controller to improve the dynamic stability of an electric power system with a Superconducting Magnetic Energy Storage (SMES) unit. The d.c. voltage applied to the SMES unit is generated from the fuzzy controller. The premise variables chosen for the fuzzy membership functions are speed error and its derivative. The rules in fuzzy cells are adapted according to the performance feedback of the closed loop system. The effectiveness of the proposed controller in restoring energy balance is demonstrated by simulation studies for different types of disturbances.