This paper presents a totally enclosed self-circulation (TESC) axial ventilation system (AVS) for large direct-drive permanent magnet synchronous machines (PMSMs). The configuration and the cooling air circulation process of the cooling system are described in detail. Then, the lumped parameter (LP) based airflow analysis and thermal analysis applicable to large PMSMs with the presented TESC AVS are proposed. The airflow network model and thermal network model are set up, respectively, and both of them are programmed. In order to verify the feasibility of the ventilation system and the accuracy of the LP models, a 1.65-MW PMSM prototype with the proposed ventilation system is developed and manufactured, and the temperature rise of the prototype is tested under generator operation mode. The accuracies of the developed airflow network model and thermal network model are verified by comparing the calculation results of the temperature rise with the test results. The LP models can be used to investigate the effects of different geometrical and operational conditions on the distributions of the airflow rate and the temperature of PMSMs with the TESC AVS.