This paper presents a novel scheme on steady-state performance of an isolated three-phase self-excited induction generator (SEIG) supplying a loaded induction motor. An approach based on a d-q axis induction-machine model is employed to derive steady-state equations of the studied SEIG. Eigenvalue analyses based on synchronous reference frame are employed to determine the critical operating conditions and dynamic stability of the studied machines. The required minimum excitation capacitance of the SEIG, the maximum torque of the induction motor load, the combined maximum operating efficiency, etc. of the studied system can be easily investigated. Experimental results obtained from a laboratory 1.1 kW induction machine driven by a DC motor and a 300 W induction motor with a DC generator as its shaft load are also performed to confirm the feasibility of the proposed method.