Flow rate monitoring plays a crucial role for precise motion control in many hydraulic systems and for detection of faults and fluid loss in hydraulic system components and circuits. In some situations, however, direct measurement of fluid flow is not possible. Besides, flowmeters are generally non-robust, expensive, and slow in response. In this paper, we have proposed an alternative approach to direct flow measurement for circuits that contain a combination of proportional valves and actuators. A nonlinear state-space representation is used to model the valve orifice area variation with respect to the valve spool position. Kalman Filtering is then utilized to estimate the valve's orifice area in real-time by fusing data from robust low-cost pressure transducers and position sensors. A close agreement is achieved between the estimated and the measured orifice areas for a valve with a complex wedge-shape orifice profile. The orifice area estimate also revealed that the valve spool was not centered at its null (zero) position, which is considered as a flaw in the valve.