This paper presents a novel type of flux-modulating synchronous machine (FMSM) in which permanent magnets (PMs) are embedded in the stator back-iron. The rotor has neither windings nor PMs. A prototype machine with an outer-rotor configuration was designed and manufactured to validate the operating principle of the FMSM. The characteristics in the motor mode of the prototype machine were also investigated with a vector control system. The results of the investigations show that, as in surface-mounted PM motors, the torque of the FMSM is predominantly generated by the PM flux and can be controlled using the armature current. (C) 2016 Wiley Periodicals, Inc.