In this paper, a novel and non-invasive stator inter-turn short circuit (ITSC) online detection method is presented for an induction machine (IM), driven by a two-level voltage source inverter (2L-VSI) via finite control set model predictive control (FCS-MPC). The main idea of the proposed method is to utilize the controller itself as an observer: under the presence of a fault, the distribution of inverter switching states significantly deviates from the original balanced case. Therefore, by inspecting the inverter switching vectors, which are the outcomes of the FCS-MPC routine’s online optimization procedure, a stator fault can be detected efficiently. It is observed that both the zero-vector allocation over the complex plane and the allocation among the active vectors are influenced by the presence of a stator short-circuit fault. The proposed fault detection strategy introduces little to no extra burden for processor and memory. Experimental results verify the proposed method, and inter-turn short circuits of two and three turns are confidently detected and located for a 500 W, two-pole IM.