This dissertation proposes several simple, robust, and non-intrusive condition monitoring methods for induction motors fed by closed-loop inverters and claw-pole generators with built-in rectifiers. While the flexible energy forms synthesized by power electronic converters greatly enhance the performance and expand the operating region of induction motors and claw-pole generators, they also significantly alter the fault behavior of these electric machines and complicate the fault detection and protection. In this dissertation, special characteristics of the connected closed-loop inverter and rectifier have been thoroughly analyzed, with particular interest in their impact on fault behaviors of the induction motor and the claw-pole generator. Based on the findings obtained from the theoretical and experimental analysis, several sensorless thermal, mechanical, and insulation monitoring methods are proposed by smartly utilizing special features and capabilities of the connected power electronic converter. A simple and sensitive stator turn-fault detector is proposed for induction motors fed by closed-loop inverter. In addition, a stator thermal monitoring method based on active DC current injection and direct voltage estimation is also proposed to prevent the closed-loop controlled induction motors from thermally overloading. The performance of both methods is demonstrated by extensive experimental results. Methods to detect serpentine belt slip, serpentine belt defect, rotor eccentricity have been proposed for claw-pole generators using only the available electric sensor information. Methods to detect and protect stator turn faults in claw-pole generators are also presented in this dissertation. Lastly, a novel method to detect the generalized bearing roughness fault is proposed. All the proposed condition monitoring techniques have been validated by experimental results.