An improved system and method for analyzing motor performance to detect vibration of an electric machine controlled by a motor drive is disclosed. A load observer determines an estimated torque present as a load on the motor as a function of input signals corresponding to a desired torque to be generated by the motor and to a measured angular position of the motor during operation. The motor drive determines a frequency response of the estimated torque to identify at what magnitude and frequency any vibration components are present within the estimated torque signal. The motor drive compares the frequency response of the estimated torque signal to set points. If the measured magnitude of vibration at a particular frequency, as seen in the frequency response, exceeds a threshold set in one of the set points for that frequency, the motor drive generates an output signal indicating an excessive vibration is present.