This paper presents the coupled electromagnetic and thermal simulation of a permanently excited synchronous machine (PMSM) in the context of virtual prototyping in a real-time hardware-in-the-loop (HiL) environment. Thermal simulation is often neglected due to the increased complexity of a coupled simulation. This neglect leads to inaccurate simulations and incomplete design optimizations. The approach presented here focuses on the development of a real-time simulation that accurately models the electromagnetic and thermal behavior. A Field-Programmable-Gate-Array (FPGA) executes the electromagnetic simulation, which is parameterized based on Finite Element Analysis (FEA) results. The thermal model is based on a Lumped Parameter Thermal Network (LPTN) and takes physical laws, geometry and material properties into account. The thermal simulation considers iron and copper losses to ensure an accurate representation of the heat sources in the system. Taking these losses into account is essential to correctly model thermal behavior under different load scenarios. The accuracy and reliability of the simulation are validated through testbench measurements. The coupled real-time simulation of transient thermal behavior offers a significant advantage for the development of e-machines by taking thermal effects into account at an early stage and testing controllers before a physical prototype is built. This leads to a targeted optimization of the machine design and a reduction in development times, particularly in the development of control units.