This paper proposes a broken rotor bar fault detection method in AC induction motors using a cascaded flux linkage and stator current observer. The proposed observer-based algorithm can enhance a fault detection accuracy by addressing major drawbacks of a widely adopted motor current signature analysis (MCSA) method, such as susceptibility to external environmental factors and low reliability. A Gopinath-style flux observer is implemented to indirectly estimate both stator and rotor flux, and a stator current observer is also added to improve the fault estimation accuracy in both low- and high-speed operation regions. This paper also includes an analytical and dynamic model of an induction motor with one or multiple broken rotor bar faults for emulating fault conditions. A broken rotor bar fault diagnosis system, namely Fault Diagnosis and Amplifying (FDnA) system, is developed and verified in simulation, which will be validated in existing experimental setup.