This paper investigates components of mechanical loss together with heat transfer effects in an axial-flux permanent-magnet motor. The mechanical loss components generated within electrical machines are well known; however, their prediction or derivation has not been widely reported in the literature. These, together with the electromagnetic loss sources and heat transfer effects, are crucial and must be accounted for when considering high-power-density, high-speed, and/or compact machine designs. This research is focused on separating the mechanical loss components to gain a more in-depth understanding of the effects and their importance. Both experimental and theoretical techniques have been employed in the analysis of a machine demonstrator. In particular, hardware tests with dummy rotors have been performed to measure the bearing and windage/drag loss components. These have been supplemented with computational fluid dynamics analysis to theoretically evaluate the aerodynamic effects occurring within the mechanical air gap accounting for loss and heat transfer. It has been identified that the analyzed hardware demonstrator suffered bearing loss significantly higher than that suggested by the bearing manufacturer. This has been attributed to design of the mechanical assembly accommodating bearings, which resulted in inappropriate bearing preload. The excessive bearing loss had a significant detrimental effect on the machine thermal behavior. In contrast, the aerodynamic effects have been found to have less pronounced effects here, due to fully enclosed and naturally cooled machine construction.