The equivalent circuit in the mobility analogy of a magnetostrictive transducer in the presence of eddy currents is derived. This equivalent circuit is used to predict the effect of eddy currents on the efficiency, the electrical impedance, the transmitting responses, and the receiving sensitivity of a magnetostrictive transducer. Lumped‐parameter equivalent circuits are also presented which use approximations to the exact theory to simply and accurately predict the efficiency and electrical impedance of a transducer with eddy currents within a frequency range of practical interest near the clamped characteristic frequency. It was found that the eddy current theory predicted a sharp drop in the eddy current loss in a narrow frequency range just past resonance. This effect was experimentally observed by Savage and Abbundi [IEEE Trans. Magn. 14, 545 (1978)].