Shaft cracks in a rotor system may lead to destructive failure, if not detected at right time. The transient vibrations of a rotor system with a transverse breathing crack during rotor shutdown has been analyzed using Finite Element Method (FEM) for flexural vibrations. Since the vibration signals during shutdown are non-stationary, continuous wavelet transform (CWT) has been used to extract the crack feature when the rotor is decelerating through critical speed during shutdown. A parametric study for different crack depths has been studied for different decelerations and it is found that CWT can be effectively used to detect the crack during rotor shutdown .