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An online technique for monitoring the condition of the groundwall (GW) and phase-to-phase (PP) insulation for three-phase ac-machine stator windings is proposed in this paper. Insulation-condition indicators such as capacitance, dissipation factor (tan δ), and ac insulation resistance are calculated online based on the differential leakage-current measurements for each phase. A model for a three-phase ac-machine insulation system is derived and analyzed for both offline and online testing. Guidelines for interpreting the measured indicators for determining the: 1) overall condition and 2) significant degradation in the individual GW and PP insulation for each phase of the stator are given based on the analysis. Experimental results on a 15-hp induction motor under intentional GW and PP insulation degradation conditions show that incipient insulation degradation can be detected and classified with high sensitivity. [ABSTRACT FROM AUTHOR]