Losses in an MHD generator not only reduce the power output but also degrade it. The losses due to heat, friction and leakage through insulating-wall/slag have been analyzed for the diagonal generator for better control and performance. The losses due to leakage are higher than the heat and friction losses. The effect of wall temperature on losses is significant. The heat and friction losses decrease with increase in wall temperature, whereas the leakage losses increase with increase in wall temperature. The slag losses reduce power output from the channel drastically.