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The use of segmented stator and rotor designs in AC electric machine construction offers several significant advantages, including a high-copper fill factor, increased torque density, improved field-weakening performance, simplified manufacturing processes, and enhanced mechanical strength. Additionally, segmented designs allow for the incorporation of oriented steel—either partially or fully—which exhibits excellent magnetic properties in the rolling direction, resulting in more efficient machine performance. However, lamination segmentation also introduces challenges. Parasitic air gaps between segments and an increased number of cut edges in the assembled stack can alter the magnetic properties of the machine, potentially leading to degraded performance. Furthermore, the use of oriented steel remains complex, as its highly nonlinear magnetic properties vary depending on the direction of the magnetic flux. This paper reviews the widely adopted stator and rotor segmentation techniques available in the literature, discussing their potential benefits and limitations. It also covers key aspects such as popular manufacturing approaches, the impact of segmentation on machine performance, advanced finite-element analysis (FEA) techniques for numerical modeling, and experimental methods for evaluating the performance of segmented stator and rotor constructions in AC machines. By addressing these areas, this work provides a comprehensive resource for machine designers seeking to develop AC machines with segmented stators and rotors.