The safety and stability of the power supply system are affected by some faults that often occur in power system. To solve this problem, a criterion algorithm based on the chaotic neural network (CNN) and a fault detection algorithm based on discrete wavelet transform (DWT) are proposed in this paper. MATLAB/Simulink is used to establish the system model to output fault signals and travelling wave signals. Db4 wavelet decomposes the travelling wave signals into detail signals and approximate signals, and these signals are combined with the two-terminal travelling wave location method to achieve fault location. And the wavelet detail coefficients are extracted to input to the proposed chaotic neural network. The results show that the criterion algorithm can effectively determine whether there are faults in the power system, the fault detection algorithm has the capabilities of locating the system faults accurately, and both algorithms are not affected by fault type, fault location, fault initial angle, and transition resistance.