According to the real time feature of relay protection and the wave characteristics of fault phase current, a new fault diagnosis scheme is introduced in this paper. It is based on wavelet transform, particularly the multiresolution analysis technique. This work focuses on how to use the wavelet transform to locate fault abrupt points, so that detect whether fault had happened, meanwhile microprocessor circuit based relay protection is proposed. The effectiveness of the proposed scheme was verified in the experiment. The simulation result shows that this method has the ability of simple algorithm, high location accurance and anti-interference, can effectively improve the sensitivity and selectivity of relay protection. Furthermore the prospect of wavelet analysis in power system, especially in relay protection is estimated.