This paper develops a method for permanent magnet (PM) temperature estimation in high power density permanent magnet synchronous machines (PMSMs) by considering magnetic saturation. Most of the previous methods in the literature are based on unsaturation. In this paper, the temperature estimation method of PMs is improved by adding a saturation coefficient. Once a machine is assembled, the inner and outer PM surfaces cannot be seen. Thus, it is impossible to realize visualization measurement of the permanent magnet temperature distribution. In this case, temperature sensors attached to the PM cam be used. However, the cost and robustness need to be considered. Therefore, in this paper, by solving a magnetic–thermal coupling finite element model, the temperature field distribution of a high power density PMSM is obtained. Then, an experimental platform is built to verify the model. Finally, the model is used to verify the reliability of the modified estimation method.