A method for diagnosing demagnetization of a motor of a vehicle can accurately diagnose an irreversible demagnetization state of a permanent magnet of a traction motor or a hybrid starter-generator (HSG) without additional hardware, while minimizing influence of irreversible demagnetization of the permanent magnet of the traction motor or the HSG on vehicle performance. The method includes acquiring operating state information of the motor, determining whether a diagnosis entrance condition including a state in which the motor performs an electricity generating operation is satisfied based on the acquired operating state information of the motor, acquiring a direct current (DC) value in diagnosis, and determining whether irreversible demagnetization occurs by comparing the acquired DC value in diagnosis with a pre-stored DC current value in a normal state of the permanent magnet.