In order to reduce data volume of carrier-free ultra-wideband (UWB) fuze's signal processing and improve fuze's instantaneity, a signal processing method for carrier-free UWB fuze based on wavelet transform is proposed in this study. Under least mean square error criterion, decompose the transmitted pulse and echo signal by wavelet transform firstly, then estimate the target's distance and velocity information on high level of wavelet decomposition, finally, generate detonator signal to drive the executive level. The simulation results show that this method can effectively estimate the distance and velocity of target, also it can reduce data volume of signal processing greatly without impacting the measurement which is good to the real-time processing and engineering applications.