This paper presents a wavelet packet transform (WPT) based on-line technique for the protection of three-phase interior permanent magnet (IPM) motor. A wavelet packet transform based algorithm for the protection of an IPM motor is developed, implemented, and tested on-line using the DS1102 digital signal processor board. The proposed algorithm is based on the identification of the WPT coefficients of second level high frequency details (dd²) of three-phase line currents of different faulted and normal unfaulted conditions using the selected mother wavelet `db3'. The minimum description length (MDL) and the Shannon entropy criteria are used for selecting the optimal mother wavelet and the optimal number of levels of resolution, respectively. The single phasing fault, single line to ground (L-G) fault, and line-to-line (L-L) faults are investigated. An experimental setup for detecting the faults incorporating also the protection circuit is developed to accommodate the on-line testings of an IPM motor. In all the tests carried out, the faults are detected and the trip signal is initiated almost at the instant or within one cycle of the fault occurrence