In order to monitor and diagnosis running status of rolling bearing in the rotating machinery,a new method of rolling bearing fault diagnosis based on sideband correlation algorithm and Hilbert envelope spectrum is put forward. Through analysis on the rolling bearing vibration model,the vibration signal can be regarded as the superposition of multiple modulation signal,the best frequency range can be found basing on the basis of the spectrum by using the sideband modulation algorithm. Then,the band-pass filtering is carried out,the time-domain signal in this frequency range is got. Finally,the Hilbert envelope and the frequency spectrum analysis are carried out. Eventually,the size of the modulation frequency is got. The analysis and verification is carried out by using the vibration signal of rolling bearing experiment,finding out the modulation frequency of vibration signals under the condition of outer ring,inner ring,rolling body defect,the fault feature can be extracted effectively. The results show that the method can accurately identify and diagnose the fault location and fault type of rolling bearings.