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Abstract Litz wires operating in a cryogenic environment can potentially improve both the efficiency and power density of electrical machines and passive components. However, due to the low resistivity and high magnetic fields, eddy‐current losses may become significant in cryogenically cooled windings, especially in airgap winding arrangements or in the case of significant slot leakage fields, unless the litz wire parameters are carefully chosen. A framework for litz wire loss performance optimization and experimental characterisation at cryogenic temperatures is provided. An optimum operating temperature for minimum loss is derived based on analytical expressions, which highlights the role of litz wire parameters, current density and external field. The proximity loss model, used to calculate the optimum operating temperature, is validated experimentally. Two test rigs with different magnetic cores were designed and built. Copper and aluminium litz wires with a strand diameter down to 0.1 mm were tested in a liquid nitrogen bath with a uniform harmonic external magnetic field up to 0.5 T peak and a frequency up to 1 kHz. Measurements show good agreement with the theoretical results and confirm that the proposed model can be confidently used during the preliminary design of cryogenic windings.