Defects in steel reinforcement are critical factors in the evaluation of the service life of reinforced concrete (RC). Steel reinforcement (bar) defects or deterioration may lead to crack propagation and strength decrease in RC structural members. Deterioration also changes the steel magnetic properties; the evaluation of these changes can be investigated by an indirect passive and non-invasive method to locate and quantify defect in RC structures. Herein, a passive magnetic inspection (PMI) method is modified and used to examine its potential as a non-destructive testing (NDT) method for condition assessment of steel reinforcement. The passive magnetic flux density of steel bar with three small holes in three different positions and locations along the bar is measured in the laboratory. A signal processing methodology based on frequency spectrum analysis and filtering is applied to the experimental data, and the results are compared with the numerical simulation. The processed data from the experimental test shows the potential of PMI method to detect, locate and evaluate bar condition. Both experimental results (after signal processing) and simulation results show a good similarity for top and bottom holes. Cross-correlation of numerical simulation with experimental data was necessary to reveal detection of the side hole.