This paper presents the development of a wavelet model-based diagnostic methodology to perform fault detection in Electro-hydraulic servo system. The objective is to introduce the wavelet analysis into the fault detection of control systems and provide an effective approach to detect faults in an electro-hydraulic servo system, After comparing the continuous wavelet transfonn (CWT) and the discrete wavelet transform (DWT), this paper gives the selection. A Discrete wavelet transform is chosen to analyse the pressure response signal from the electro-hydraulic servo system. Signals from healthy condition, incipient fault condition to failure condition are collected from a test rig with electro-hydraulic position control system. The results show that some problems exist on the wavelet analysis when directly applied for control systems. As a solution, this paper develops a wavelet model -based approach (WMBA). In this approach, a model in DWT form is built for the electro-hydraulic servo system at its healthy condition. This model is used to generate a residual signal by comparing the healthy signal and the signal in the running system. By processing the residual signal, faults from incipient fault to serious fault can be detected effectively. As the conclusion, wavelet analysis can be a powerful tool in the fault diagnosis of control systems.