Alternators generate electricity by the same principle as DC generators, namely, when the magnetic field around a conductor changes, a current is induced in the conductor. Typically, a rotating magnet called the rotor turns within a stationary set of conductors wound in coils on an iron core, called the stator. The field cuts across the conductors, generating an induced EMF, as the mechanical input causes the rotor to turn.

The rotating magnetic field induces an AC voltage in the stator windings. Often there are three sets of stator windings, physically offset so that the rotating magnetic field produces three phase currents, displaced by one-third of a period with respect to each other.

The rotor magnetic field may be produced by induction (in a "brushless" alternator), by permanent magnets (in very small machines), or by a rotor winding energized with direct current through slip rings and brushes. The rotor magnetic field may even be provided by stationary field winding, with moving poles in the rotor. Automotive alternators invariably use a rotor winding, which allows control of the alternator generated voltage by varying the current in the rotor field winding. Permanent magnet machines avoid the loss due to magnetizing current in the rotor, but are restricted in size, owing to the cost of the magnet material. Since the permanent magnet field is constant, the terminal voltage varies directly with the speed of the generator. Brushless AC generators are usually larger machines than those used in automotive applications.