Peak torque and power density requirements for traction motor drives continue to increase, while demands on reliability are getting increasingly stringent as well. With the knowledge that most of the failure mechanisms are related to excessive temperature (cycling), thermal management is a key for increasing performance, without jeopardizing reliability. This paper proposes a control strategy for active thermal management of permanent magnet synchronous motor (PMSM) drives, based on real-time estimation and feedback of switching device and motor temperatures. By regulating the switching frequency and current control limit, critical components can be safeguarded from excessive temperature rise. Furthermore, optimal dq-current control vectors are calculated within the temperature and voltage constraints, to maximize the drive’s efficiency and speed–torque envelope. Hence, the control strategy enables the drivetrain to operate safely at maximum attainable performance limits. The strategy is experimentally validated on an 11-kW PMSM drive for a number of representative vehicle loads, including a maximum standstill torque test, a maximum acceleration test, and a driving cycle test.