This thesis investigates the influence of magnetic saturation on the electromagnetic performance of fractional slot permanent magnet (FS PM) machines, with particular reference to the influence of local magnetic saturation on terminal voltage distortion. The terminal voltage in this thesis is the voltage measured between the machine winding terminals, especially referring to the on-load condition. All theoretical analyses are carried out by the 2-dimensional finite element method and validated by experiments made on several prototypes. The mechanisms of terminal voltage distortion in FS surface-mounted PM (SPM) machines and interior PM (IPM) machines are investigated with the aid of frozen permeability method. The results show that the change in local magnetic saturation caused by tooth-tip leakage flux is the main reason for the terminal voltage distortion in both SPM and IPM machines when current advance angle (ß) is around 0° especially when small or closed slot openings are adopted. Meanwhile, the local magnetic saturation affected by the variation of rotor flux paths is also responsible for the terminal voltage distortion in IPM machines particularly when ß approaches 90°. Furthermore, the influences of slot and pole number (Ns/2p) combinations are systematically investigated. It shows that all FS SPM machines exhibit higher voltage distortion than the integer slot SPM machines, whilst all FS IPM machines suffer less voltage distortion than the integer slot machines. For FS machines appearing in pairs, e.g. Ns=2p±2, the ones with Ns > 2p always have less voltage distortion than their counterparts with Ns < 2p. The machines suffering more from voltage distortion usually have higher distortions of on-load back-EMF, on-load cogging torque, dq-axis inductances and torque ripple, while their torque speed characteristics will be more deteriorated from the ideal curves calculated by the fundamental voltage only. Finally, the minimisation methods of terminal voltage distortion are investigated. It shows that design trade-offs should be made in order to balance different machine performances according to the most frequent operation load conditions.