The paper describes a variable speed wind energy conversion scheme where fuzzy logic principles and matrix converter (MC) are used for efficiency optimization and performance enhancement. A squirrel cage induction generator feeds the power to an improved topology of MC which pumps power to a utility grid. The power factor at the interface with the grid is controlled by the MC to ensure purely active power injection into the grid for optimal utilization of the installed wind turbine capacity. Furthermore, the MC to avoid self-excitation capacitors satisfies reactive power requirements of the induction generator. The generation system has fuzzy logic control with vector control in the inner loops. Fuzzy controller tracks the angular frequency with the wind velocity to extract the maximum power and programs the machine flux for light load efficiency improvement. The complete control system has been developed, analyzed, and validated by simulation study.