As one of the most important load-bearing components of cable-stayed bridges, the integrity of cables is essential to bridge condition assessment. However, the traditional one-dimensional damage location method has difficulty determining the spatial location of the damage source on parallel steel wire cables.Acoustic emission (AE) technology is a common means of structural health monitoring, and one of its most beneficial attributes is the ability to localize the damage. For this reason, a three-dimensional (3D) location algorithm based on the AE signal propagation path is proposed for cable damage localization. First, the propagation path of simulated AE signals in a parallel steel wire bundle (PSWB) was visualized using COMSOL Multiphysics software platform. Then, a 3D localization algorithm suitable for PSWB damage is proposed based on the propagation path and dispersion characteristics of AE waves. After that, experimental verifications were performed, and it was found that the damage locations can be determined accurately using the proposed algorithm. This algorithm helps to localize the damage source with only a few sensors and is crucial for cable protection and replacement.