Direct drive permanent magnet synchronous generators have numerous advantages such as improved reliability, low maintenance, long life, and developed performance characteristics. In recent years, many researchers have worked on this generator to enhance the performance of the generator, especially for the wind turbine application. The focus of this paper is on the development of a step-by-step method for the design of a permanent magnet synchronous generator. Then the winding function method is used to model the generator and calculate its output characteristics analytically. The analytical results of the designed generator are validated using the finite element analysis (FEA) and it is demonstrated that the obtained results from both methods are in great agreement with the experimental measurements of the Northern Power direct-drive generator. The sensitivity analysis and optimization procedure based on the genetic algorithm are used to design an optimum generator. The optimization goal is obtaining higher efficiency and power factor with lower voltage regulation and required permanent magnet volume compared to the initial design. In addition, the calculation of the voltage total harmonic distortion (THD) is presented and the optimum skew angle for the optimum generator is computed to reduce the voltage THD.