Aiming at the problem of motor speed decrease in direct-drive permanent magnet synchronous generator (D-PMSG) wind power generation system after permanent magnet (PM) demagnetization faults, a demagnetization fault-tolerant control strategy in D-PMSG wind power generation system is proposed. Firstly, the D-PMSG mathematical model is described in normal and demagnetization. Secondly, an extended Kalman filter (EKF) observer is designed to observe the PM flux online. Then, flux linkage parameters are introduced into the two-vector model predictive faulttolerant control so that the increase of stator current is controlled within the limit range. Meanwhile, the motor speed can follow the change of the given speed. In addition, the improved Luenberger mechanical torque observer is designed in the speed outer ring to deal with the vibration caused by unstable wind speed. Finally, compared with the dual-closed-loop Proportional Integral (PI) control, the experimental results show that the demagnetization fault-tolerant control strategy has smaller speed overshoot and smaller speed fluctuation when the mechanical torque changes. The method can maintain the speed balance when the PM demagnetization faults occur and have stronger fault tolerance and antiinterference ability.