This paper analyzes the characteristics of a vector-controlled permanent-magnet synchronous motor (PMSM) with a permanent-magnet defect. A method for the diagnosis of the demagnetization of the permanent magnet in PMSM is proposed. In the proposed method, the magnetic field is calculated by the finite-element method, and then the flux linkage and d and q axis inductances are calculated. They are introduced into the block diagram of the drive and control system. We have manufactured interior permanent-magnet motors, where one of four magnets is reduced by 10% and 20% in order to imitate the demagnetization. It is shown that the Fourier and wavelet results are in good agreement with the measured ones. This paper shows that the stator current and stator voltage using the proposed method are useful for the fault detection of demagnetized permanent magnet.