This paper presents an efficient and fast fault-tolerant control scheme for a bidirectional Z-source inverter (BiZSI)-fed induction-motor drive system for vehicular applications. The proposed strategy aims for the fault detection, localization and diagnosis of the proposed system during switch failures in the inverter module. Generally, power–semiconductor switch failures in inverter modules occur due to open- and short-circuit faults. An efficient modulation scheme is proposed and design specifications are thoroughly derived to obtain high voltage gains across the BiZSI network. A suitably fast detection and diagnosis scheme to isolate the faulty leg and resume the normal operation is discussed in this paper. The control scheme is provided such that the faulty leg is isolated and the motor phase is fed from a redundant leg to resume the operation. A feasible localization algorithm based on experimentally derived values and switching vectors is implemented. In addition, a fast fault diagnosis method based on current estimation and motor speed variation is designed and implemented. Moreover, the most important advantages of the proposed strategy include lower hardware requirements and less harmonic distortion in the output currents. Finally, the simulation and experimental results are presented to validate the feasibility of the theoretical analysis. An extensive performance evaluation of the proposed system with fault ride-through capabilities is performed to prove its suitability for vehicular applications. To validate its merits, the proposed strategy is compared with similar fault-tolerant schemes currently used in the industry.