This work is focused on inter-turn short-circuit located at a stator phase winding of the permanent magnet synchronous machine (PMSM). Considering the PMSM behavior under fault, the mathematical model has been developed aiming to detect accurately the stator inter-turn fault in dq synchronous frame. A simple method is proposed able to diagnose the stator windings damage in an initial stage based on a sliding mode observer (SMO) for stator flux. After observer convergence, the derived equivalent control signals are used to estimate the caused voltage disturbance. In evaluating the performance of the inter-turn fault detection algorithm, the magnetic saturation is taken into account in presence of faulty conditions. Since the produced flux distortion is strongly related to the nature and extent of the phase fault, the analysis of the associated waveforms could appeal a precise fault description. Simulation results illustrate the effectiveness of the proposed fault diagnosis and prognosis method in determining an inter-turn phase fault during steady and transient state operation.