In this paper, we investigate the effects of multi-axial mechanical stress on eddy current and hysteresis losses in electrical steel sheets used for rotating machines. First, the variation of these losses with the multi-axial stress is confirmed by material experiments. From the results, appropriate and useful mechanical-electromagnetic modeling for loss analysis of rotating machines is discussed. Finally, the proposed modeling is applied to the combined electromagnetic field and stress analyses of an interior permanent magnet machine to reveal the effects of multi-axial stress on the rotor core loss, which is directly related to the thermal demagnetization of permanent magnets. It is clarified that both the hysteresis loss and the eddy current loss including excess loss depend on the multi-axial stress. As a consequence, the rotor core loss of interior permanent magnet machine increases by the stress caused by centrifugal force.