Abstract: As a kind of new method of signal analysis and processing, the wavelet transform could be used to analyze any time and any frequency of AE signal in the time and frequency domain. The wavelet transform is applied to AE signal processing and it will be helpful to the development and popularization of AE technique. The characters and recognition of simulated AE signals in Q235B were researched by using Gabor wavelet and Fourier transform, which were based on Gaussian function. The experiment showed that it would be helpful to study the characters of AE signal and source and choose the right sensor.