This paper proposes optimal step-skew methods for cogging torque reduction in interior permanent magnet (IPM) machines. First, a vector diagram method is employed to analyze the principle of a conventional three-step-skewed rotor, followed by two-dimensional (2-D) finite element (FE) validation. However, a considerable component of the cogging torque still exists according to 3-D FE analysis. End leakage flux and interaction between adjacent rotor steps are then investigated. To further reduce the residual cogging torque component, two improved step-skew methods are proposed-first, a rotor with optimal step-skew angles and, second, a rotor with optimal step lengths. Furthermore, the influence of manufacturing tolerance with axial placement of the rotor steps is investigated and leads to further corrections of the proposed methods, followed by analyses on other IPM machines having different stator slot/rotor pole combinations. Finally, prototypes are fabricated and tested to verify the foregoing analyses.