An improved method of estimating the oil temperature of an internal combustion engine models the net heat flow through the oil during operation of the engine based on known engine operating parameters and integrates the net heat flow to update the oil temperature estimate. The net heat flow components include heat added to the oil due to fuel combustion and heat rejected from the oil to the engine coolant and atmospheric air, and are based on heat transfer coefficients that are adjusted to take into account variations in engine speed, vehicle speed and cooling fan operation.