Mechanical tolerance is something that should be carefully taken into consideration and cannot be avoided in a product for manufacturing and assembly needs, especially in the design stage, to avoid excessive dimensional and geometric deviations of the components made. This paper discusses how to determine and allocate dimensional and geometric tolerances in the design of a 10 kW, 500 rpm radial flux permanent magnet generator prototype components. The electrical and mechanical design results in the form of the detailed nominal dimensions of the generator components, and the allowable air gap range are used as input parameters for tolerance analysis. The values of tolerance allocation and re-allocation process are carried out by considering the capability of the production machine and the ease level of the manufacturing process. The tolerance stack-up analysis method based on the worst case (WC) scenario is used to determine the cumulative effect on the air gap distance due to the allocated tolerance and to ensure that the cumulative effect is acceptable so as to guarantee the generator's functionality. The calculations and simulations results show that with an air gap of 1 ± 0.2 mm, the maximum air gap value obtained is 1.1785 mm, and the minimum is 0.8 mm. The smallest tolerance value allocation is 1 µm on the shaft precisely on the FSBS/SRBS feature and the rotor on the RPMS feature. In addition, the manufacturing process required to achieve the smallest tolerance allocation value is grinding, lapping, and polishing processes.