This project was aimed at developing a new noncontacting thermoelectric method for nondestructive detection of material imperfections in metals. The method is based on magnetic sensing of local thermoelectric currents around imperfections when a temperature gradient is established throughout a conducting specimen by external heating and cooling. The surrounding intact material serves as the reference electrode therefore the detection sensitivity could be very high if a sufficiently sensitive magnetometer is used in the measurements. This self-referencing, noncontacting, nondestructive inspection technique offers the following distinct advantages over conventional methods: high sensitivity to subtle variations in material properties, unique insensitivity to the size, shape, and other geometrical features of the specimen, noncontacting nature with a substantial stand-off distance, and the ability to probe relatively deep into the material. The potential applications of this method cover a very wide range from detection metallic inclusions and segregations, inhomogeneities, and tight cracks to characterization of hardening, embrittlement, fatigue, texture, and residual stresses.