The characteristics of the early fault signal of the rolling bearing are weak and this leads to difficulties in feature extraction. In order to diagnose and identify the fault feature from the bearing vibration signal, an adaptive local iterative filter decomposition method based on permutation entropy is proposed in this paper. As a new time-frequency analysis method, the adaptive local iterative filtering overcomes two main problems of mode decomposition, comparing traditional methods: modal aliasing and the number of components is uncertain. However, there are still some problems in adaptive local iterative filtering, mainly the selection of threshold parameters and the number of components. In this paper, an improved adaptive local iterative filtering algorithm based on particle swarm optimization and permutation entropy is proposed. Firstly, particle swarm optimization is applied to select threshold parameters and the number of components in ALIF. Then, permutation entropy is used to evaluate the mode components we desire. In order to verify the effectiveness of the proposed method, the numerical simulation and experimental data of bearing failure are analyzed.