This article proposes a model-based method for the detection and phase location of interturn short fault (ISF) in the permanent magnet synchronous generator (PMSG). The simplified mathematical model of PMSG with ISF on dq-axis is established to analyze the fault signature. The current residuals are accurately estimated through Luenberger observer based on the expanded mathematical model of PMSG. In current residuals, the second harmonics are extracted using negative sequence park transform and angular integral filtering to construct the fault detection index. In addition, the unbalance characteristics of three-phase current after ISF can reflect the location of the fault phase, based on which the location indexes are defined. Simulation results for various operating and fault severity conditions primarily validate the effectiveness and robustness of diagnosis method in this paper.