Reinforced concrete is widely used in urban and industrial structures. Exposure of such structures to cyclic loads may cause crack initiation in the reinforcement steel (rebar). In extreme cases, incremental crack propagation under the effects of accelerants such as corrosion and external loads can lead to catastrophic failures. To minimize the various risks resulting from unexpected loss-of-function, rebar condition can be assessed using a novel passive magnetic-based method. In this study, the magnetic properties of defective rebars with transverse cracks are recorded and assessed through experiments. Additionally, the self-magnetic behaviors of similar defective rebars are subsequently simulated using a finite-element based software. Analysis approaches are used on the magnetic data, and thresholds are defined for detecting and categorizing the cracks. For instance, it is demonstrated that the cracks causing rebars’ cross-sectional loss of about 30% are detected using the threshold of 0.95 percentile rank on the magnetic values’ absolute gradients.