In 1888, the editor of Electrical World magazine, Thomas Commerford Martin (a friend and publicist), arranged for Tesla to demonstrate his alternating current system, including his induction motor, at the American Institute of Electrical Engineers (now IEEE). Engineers working for the Westinghouse Electric & Manufacturing Company reported to George Westinghouse that Tesla had a viable AC motor and related power system—something that Westinghouse had been trying to secure the patents to. Westinghouse looked into getting a patent on a similar commutatorless rotating magnetic field based induction motor presented in a paper in March 1888 by the Italian physicist Galileo Ferraris but decided Tesla's patent would probably control the market.:160–162

In July 1888, Brown and Peck negotiated a licensing deal with George Westinghouse for Tesla's polyphase induction motor and transformer designs for $60,000 in cash and stock and a royalty of $2.50 per AC horsepower produced by each motor. Westinghouse also hired Tesla for one year for the large fee of $2,000 ($52,500 in today's dollars) per month to be a consultant at the Westinghouse Electric & Manufacturing Company's Pittsburgh labs.

During that year, Tesla worked in Pittsburgh, helping to create an alternating current system to power the city's streetcars. He found the time there frustrating because of conflicts between him and the other Westinghouse engineers over how best to implement AC power. Between them, they settled on a 60-cycle AC current system Tesla proposed (to match the working frequency of Tesla's motor), although they soon found that, since Tesla's induction motor could only run at a constant speed, it would not work for street cars. They ended up using a DC traction motor instead.