Abstract: The present states of condition monitoring and fault diagnosis of rotating machines are introduced, and it is found that AE technique is a very valid means applied on rotating machines fault monitoring and diagnosis. Based on the structure features and AE signal characteristics of rotating machines, the paper puts forward a specific fault monitoring and diagnosis system applied on rotating machines of which AE technique is the core. The components and functions achieving of the system are introduced in detail. Under imitating operating conditions, real-time diagnosis of some faulty rolling element bearings have been carried on, using the temporal and spectral analysis function and envelopment analysis function of the system, thus the reasonableness, usefulness and validity of the system are proved.