This paper's aim is to present a novel distributed estimation technique for linear time-invariant systems with network-induced delays and packet dropouts. The methodology is based on local Luenberger-like observers in combination with consensus strategies. Only neighbors are allowed to communicate and the observer design contemplates the possibility of sharing only a subset of the estimates. The design problem is solved via linear matrix inequalities and an asymptotic stability proof is provided. (C) 2012 Elsevier Ltd. All rights reserved.