A model-based methodology for the estimation of both lateral and vertical track irregularities is presented. This methodology, based on Kalman filter techniques, was developed for an independent and compact measuring system comprising an instrumented axle equipped with a limited set of low-cost sensors: a 3D gyroscope, a linear variable differential transformer (LVDT) distance sensor, and an encoder. The instrumented axle can be used on any railway vehicle traveling at moderate forward speed to provide measurements in real-time. The proposed methodology, combined with the instrumented axle, enables precise and prompt measurement of track irregularities. An experimental campaign carried out on a 1:10 scale track facility at the University of Seville validated both the system and the methodology. In the testing, 80 m of scaled track was measured at an operational speed of V = 0.65 m/s in just 2 min. Simulation estimates for track irregularities compared against the measured data from the testing showed a good performance of the proposed methodology, with maximum errors of 0.45 mm in the short wavelength range D1, the range most influential to vehicle dynamic behavior.