This paper presents the operation and control strategy for a direct drive variable speed permanent magnet synchronous generator to inject maximum power to the grid. A control strategy with maximum power extraction for the generator side dc to dc converter is proposed. The generator speed is regulated under fluctuating wind speed through this converter. A dc link voltage controller is used to regulate the dc bus voltage under fluctuating wind and grid disturbance. Control strategy for active and reactive power flow to the grid is developed to transfer power to the grid through the vector controlled IGBT inverter. A simulation model for the proposed wind energy conversion system together with its controller is implemented in Matlab/Simpower environment. Simulation results confirm that proposed controllers for the wind energy conversion system worked well under fluctuating wind and grid disturbance.