This paper presents the design of an Extended Gradient Predictor and Filter for smoothing Received Signal Strength Indicator (RSSI). In wireless communication RSSI is a measurement of power in received signal, which is a parameter used for handover and position estimation purpose. In real time applications such as handover and position estimation requires continuous reception of RSSI measurements. Due to the effect of noise, variations occur in the received signal, which sometimes produce communication holes. In that case, RSSI measurements become zero, which produces distance estimation error. In order to minimize the effect communication, an existing Gradient filter is modified based on most recent RSSI measurement received. The advantage of the proposed extended Gradient RSSI predictor and filter is that it predicts and filters RSSI values in the presence of communication holes for real time object tracking. The performance of proposed extended Gradient RSSI predictor and filter is tested using simulated and real-time RSSI measurements using Bluetooth technology, which shows better performance in case of communication holes occur. © 2014 Global IT Research Institute (GIRI).