Drag torque compensation is a part of the control units of modern gasoline and diesel engines. To achieve it, a characteristic drag torque curve as a function of the engine speed is usually saved in the ECU. Since the drag torque will not be constant during an engine’s lifetime, this curve must be adapted. This paper proposes an approach to adapt the drag torque curve. The goal is achieved using a high gain observer known as a Kalman filter. The proposed method combines detection of drag torque curve errors and adaptation of the drag torque curve in one step. The effects of variable geometry turbochargers are included in the overall curve by an extension of the basic algorithm. The performance of the method is shown using data and measurements on a BMW M47D engine. As the measurements confirm, the proposed method works consistently and correctly.