In recent years, the induction machines are increasingly being used as self-excited induction generators (SEIG). This generator is especially widely employed for small-scale power plants driven by renewable energy sources. The application of power electronic components in the induction generator control (IGC) and the loading of SEIG using nonlinear loads will generate harmonic currents. This paper analyzes the propogation of harmonic currents on the SEIG with nonlinear loads. Transfer function method in the frequency domain is used to calculate the gain and phase angle of each harmonic current component which are generated by a nonlinear loads. Through the superposition approach, this method has also been used to analyze the propagation of harmonic currents from nonlinear load to the stator windings. The simulation for the propagation of harmonic currents for a 4 pole, 1.5 kW, 50Hz, 3.5A, Y-connected, rotor-cage SEIG with energy-saving lamps, have provided results almost the same with the experiment. It can prove that the validity of the proposed models and methods. The study results showed that the propagation of harmonic currents on the stator windings rejects high order harmonics and attenuates low order harmonics, consequently THDI diminish significantly on the stator windings.