The invention relates to a drive system with a limited slip electric differential drive unit. A limited slip electric drive system for a motor vehicle is disclosed. The system uses an induction motorhaving a stator, and first and second rotors disposed for independent rotation within the stator. The rotors are each independently associated with one wheel of the vehicle and are able to slip when the vehicle goes around a turn. A traction inverter and control system monitors angular speeds of the rotors and determines which of the rotors is turning slower than the other, and controls the induction motor in accordance with the rotor having a lower speed so that a torque signal is generated in accordance with the rotor having the lower speed.