This paper describes a novel and patented air-gap monitoring system for large low speed synchronous hydro-generators. This new system is based on inductive sensors, it is able to measure in real time a static or a dynamic rotor eccentricity, a stator or a rotor deformation, a partial short-circuit in the field winding. It determines also the unbalanced magnetic pulls in magnitude and direction by taking into account not only the saturation level in the magnetic main circuit but also the different damping effects due to the currents in parallel paths and equipotential connections of the stator winding and, in the case of a static eccentricity, due to the damper winding. Large low speed hydro-generators have a very small specific air-gap (25 - 30 mm) to stator bore diameter (up to 22 m) ratio making it virtually impossible to have a perfect centering of the rotor within the stator during the assembly process. Therefore the machines are operated with an eccentricity that, though small, is not negligible, and is the cause of undesirable effects: considerable unbalanced magnetic pulls, vibrations, additional losses. It is therefore important to assess the eccentricity and even more to check its trend in case of any stator or rotor deformations in order to guarantee a safe operation and to prevent any serious damage at an early stage. A series of tests on large machines as well as on a laboratory prototype machine have confirmed the advantages of this new monitoring system in terms of performances and costs compared to the capacitive air-gap monitoring solutions available these days on the market