A robotic control system is placed in clutch mode so that a slave manipulator holding a surgical instrument is temporarily disengaged from control by a master manipulator in order to allow manual positioning of the surgical instrument at a surgical site within a patient. Control systems implemented in a processor compensate for internally generated frictional and inertial resistance experienced during the positioning, thereby making movement more comfortable to the mover, and stabler from a control standpoint. Each control system drives a joint motor in the slave manipulator with a saturated torque command signal which has been generated to compensate for non-linear viscous forces, coulomb friction, cogging effects, and inertia forces subjected to the joint, using estimated joint angular velocities, accelerations and externally applied torques generated by an observer in the control system from sampled displacement measurements received from a sensor associated with the joint.