The degradation in efficiency of auxiliary components in heating/cooling systems when operating at part load is frequently reported. Through the use of variable speed components, the supplied capacity can be reduced to match the required load and hence reduce unnecessary energy consumption. However, for fan coil units, difficulties can arise when optimizing fan and pump speeds at part load. Practically locating optimal water and air flow rates from readily available information and for varying supplied capacities is necessary, in order to reduce the fan coil power consumption. This research attempts to identify whether optimal fan and pump speeds exist for a fan coil unit and how they can be implemented, in a practical manner, in a system control applications. Using an empirical fan coil and pump model, the total power consumption (fan and pump) for different combinations of fan and pump speeds over a range of capacities was calculated. It was observed that, for a given capacity, an optimal combination of fan and pump speeds exists and there was a significant change in power consumption for different combinations of fan and pump speeds supplying the same capacity. A control strategy is described that utilizes a simple fan coil capacity estimation model, coupled with air and water flow rates, along with nominal design data. The pump speed is optimized using PID control to maintain the space temperature at the chosen set-point, which matches the supplied capacity to the required capacity. At set-time intervals, the capacity estimation model is utilized to optimize the water and air flow rates for the required capacity. The control strategy is evaluated, using a full building simulation model for a daily load profile and is compared to two baseline conditions: for no control of the fancoils/pump combination and for PID circulation control of the pump only. The optimal fan and pump speed control resulted in a 43% and 24% decrease in power consumption with compared to the no control baseline and the PID controlled circulation pump strategy, respectively