For small hydropower stations using direct\|drive permanent magnet synchronous generators (PMSGs), there exist the needs of adapting to the changes of the external environment such as the change of flow water and the unstable speed of rotation, and improving the efficiency of the power generation. Based on the control algorithm of the direct-drive PMSG on the generator side, a sliding mode observer (SMO) with feedback automatic gain control algorithm is designed to estimate the rotor position of PMSG, so as to improve the estimation error at low speed. We design a set of 37 kW PMSG generator and carry out experiment tests. The results verify that the algorithm can effectively control the rotor position estimation error of the direct-drive PMSG at low speed, and quickly converge at high speed, meeting the control requirements of PMSG.