Future planetary exploration missions will require rovers to traverse very rough terrain with limited human supervision. Wheel-terrain interaction plays a critical role in rough-terrain mobility. In this paper an on-line estimation method that identifies key terrain parameters using on-board rover sensors is presented. These parameters can be used for accurate traversability prediction or in a traction control algorithm. These parameters are also valuable indicators of planetary surface soil composition. Simulation and experimental results show that the terrain estimation algorithm can accurately and efficiently identify key terrain parameters for loose sand.