this study proposes a magnetic sensor design and application for monitoring the health of rotor magnets in permanent magnet (PM) electrical machines through in-situ observation of the air-gap magnetic flux density. The reported device employs the concept of Fibre Bragg Grating (FBG) strain sensing fusion with magnetostrictive material to deliver a machine stator slot wedge integrated sensor that allows straightforward installation and retrofit with no invasive action to core elements of the machine. The sensing theory, design, prototyping, calibration and installation of the proposed magnetic sensing scheme are detailed in the paper. The sensor was installed into an inverter driven surface mount PM synchronous machine (SPMSM) and its performance for in-situ observation of rotor PM magnetization conditions validated in a range of healthy and demagnetised PM conditions tests. The obtained experimental data demonstrate the reported device’s capability to enable recognition of rotor PMs’ magnetisation level and thus their health monitoring. Finally, a fault index is proposed and experimentally validated that allows the application of in-situ magnetic sensor measurements for relative quantification of PM demagnetization fault severity.