Torque production capability of permanent magnet synchronous machines (PMSMs) depends on the magnetization state of the permanent magnets (PMs). Electrical stress, thermal stress, or the combined effect of both can produce demagnetization of the PMs, which eventually can result in several adverse effects including decrease in the motor torque and efficiency, and increase of the torque ripple and vibration, eventually degrading the performance and reliability of the motor and drive system. A number of approaches have been proposed for detecting PM demagnetization using model-based flux estimation, signal injection, spectrum analysis of current/back-EMF; however, all these methods show limitations in terms of invasiveness, implementation cost and/or reliability of the diagnosis. In this paper, accurate PM demagnetization detection based on measurements from hall-effect sensors is proposed. Such sensors are often mounted in commercial PMSMs, the proposed method can therefore be implemented at practically no cost.