This paper presents a Doppler lidar optimal estimation method (DLoe) to retrieve wind speed and direction profiles from a scanning Doppler lidar measurements. An important advantage of this method when compared to the traditional Doppler lidar wind retrieval algorithm (DLtrad) is that it accounts for the level-to-level covariance that occurs in the atmosphere. Another advantage is the DLoe method provides full error covariance matrix of the solution, as well as profiles of information content. This new method was tested using Doppler lidar measurements at ARM Southern Great Plains (SGP) site. Comparison with DLtrad results and radiosonde wind measurements show excellent agreement. Some discussion of ability of DLoe to provide results above heights where DLtrad method does not provide a solution will be provided.