A patent pending, energy based, method is presented for controlling a haptic interface system to ensure stable contract under a wide variety of operating conditions. System stability is analyzed in terms of the time -- domain definition of passivity. We define a "Passivity Observer" (PO) which measures energy flow in and out of one or more subsystems in real-time software. Active behavior is indicated by a negative value of the PO at any time. We also define the "Passivity Controller" (PC), an adaptive dissipative element which, at each time sample, absorbs exactly the net energy output (if any) measured by the PO. The method is tested with simulation and implementation in the "Excalibur" haptic interface system. Totally stable operation was achieved under conditions such as stiffness > 100 N/mm or time delays of 15ms. The PO/PC method requires very little additional computation and does not require a dynamical model to be identified.