Coal mine rockburst is closely related to the complex geological structure. Understanding the criterion of the fault activation instability and the disaster-causing mechanism of rockburst under the influence of mining is the theoretical premise and important guarantee of safe and efficient coal mining. In this paper, based on the theory of key stratum, the mechanical model of fault slip instability in the normal fault during the hanging wall mining was established, and the instability criterion was derived. It is concluded that the fault slip instability of the hanging wall is mainly controlled by two factors: (1) the distance between coal seams and key stratum and (2) the distance between working face and fault. Moreover, these two factors have an inverse relation to the occurrence of rockburst. Subsequently, three conceptual models of rockburst induced by the fault stress transfer, stress concentration of coal pillars, and fault structural instability were proposed. Based on the rock mechanics theory, the rockburst carrier system model of “roof-coal seam-floor” near the fault was established. The mechanical essence of fault rockburst was obtained as follows: under the action of fault, the static load of fault coal pillar was increased and superimposed with the fault activation dynamic load, leading to high-strength rockburst disaster. Based on the occurrence mechanism of fault rockburst, the monitoring and prevention concept and technical measures were proposed in three aspects, including the monitoring and control of fault activation dynamic loads, the monitoring of high static load in fault coal pillar and stress release, and the strengthening roadway support. These prevention and control measures were verified in the panel 103down02 of the Baodian Coal Mine in engineering, and the effectiveness of these measures was proved.