Smart grid requires the urban power grid having flexible operation structure and can restore the lost load in time when fault occurs. Through analyzing the characteristic of operation structure of the urban power grid and its relay protection act information, bidirectional relating model between relay protections and components is built. And then the relating matrix of relay protections and likely fault components is formed. The reliability that fault occurred in some component is calculated by the model presented in this paper. And this index is proposed to diagnose the fault component in the urban power grid. The relay protection is divided into two types: definite protection and non-definite protection. The value of definite protection in relating matrix is enlarged to be a larger positive integer to prevent the fault information withering away in the calculation process, which makes the algorithm be able to deal with complication instance, such as rejecting act of relay protection or breaker, multiple faults, and so on. Simulation test is carried out on data of an actual urban power grid. The result indicates that fault information is entirely contained in the relating matrix, and the diagnosis method of fault information proposed in this paper is simple and practical.