This paper utilizes a new nonlinear observer design technique for estimation of slip angle in automotive applications. Inexpensive sensors that measure yaw rate and lateral acceleration and are normally available for yaw stability control systems are used. The observer design approach utilizes the mean value theorem to express the nonlinear error dynamics as a convex combination of known matrices with time varying coefficients. A modified form of the mean value theorem for vector nonlinear systems is presented. The observer gains are then obtained by solving linear matrix inequalities (LMIs). The developed approach also can enable observer design for a large class of differentiable nonlinear systems with a globally (or locally) bounded Jacobian. The developed nonlinear observer is evaluated through experimental tests on a Volvo XC90 sport utility vehicle. Detailed experimental results show that the developed nonlinear observer can reliably estimate slip angle for a variety of test maneuvers on road surfaces with different friction coefficients.