A system and method for controlling an electric vehicle include at least one controller configured to detect an over-voltage condition when an electric-machine voltage exceeds an over-voltage threshold. In response to the over-voltage condition, the electric machine and a variable voltage controller (VVC) are disabled. Upon determining the electric-machine voltage is decreased to at least a second threshold being less than the over-voltage threshold, the controller is configured to set the VVC to a limited-operation mode. Upon determining the electric-machine voltage is decreased to at least a third threshold being less than the second threshold and the over-voltage threshold, the controller is configured to re-enable the electric machine and set the VVC to a normal-operation mode. The limited operation-mode enables the vehicle to maintain vehicle propulsion during the drive-cycle as the electric machine is recovered from a transient condition causing the over-voltage condition.