The invention discloses a switched reluctance motor (SRM) rotor position square wave signal fault diagnosis and fault tolerance method, comprising the steps of: performing Fourier expansion spectrum analysis on the position square wave signal outputted by an SRM position sensor; diagnosing in real time whether the position square wave signal goes wrong by checking whether a secondary harmonic coefficient is zero; determining that the position sensor is out of order if the secondary harmonic coefficient is not zero, thereby realizing real time fault monitoring and diagnosis; and based on a position signal fault tolerance control method after a position square wave signal fault, utilizing residual normal position square wave signals to calculate a rotor rotating speed and to estimate an average rotating speed after the diagnosis that the position square wave signal outputted by the position sensor goes wrong, and utilizing the average rotating speed to calculate a rotor position to realize fault tolerance control after position square wave signal faults, thereby improving the reliability of an SRM driving system, and avoiding SRM control failure caused by rotor position signal decoding disorder.