AbstractThe indirect least squares (ILS) approach is broadly regarded as a procedure of deriving the structural parameters of a simultaneous equation system indirectly from the estimates of reduced‐form parameters. In this paper it is shown that theILSapproach yields estimators which are identical with the two‐stage least squares estimator, when applied to a single equation, and the three‐stage least squares estimator, when applied to the complete system. Thus a fresh motivation for theILSmethod is pro