The invention belongs to the technical field of computers, relating to fault diagnosis system and method of an encoder based on logic compatibility and aiming to provide an automatic fault diagnosis device of an encoder and a diagnosis solving method thereof. The fault diagnosis system comprises a user interface unit, a model description unit, a language analysis unit, a conflict recognition unit, a diagnosis solving unit, a fault positioning unit and a digital communication unit. The system is specially characterized in that the structure, function and component behavior of the encoder is prescriptively described by using a model description language according to an encoder constitution principle, accordingly, the expected behavior of the encoder under normal circumstances is deduced, differences exist between the expected behavior and an actual observation when a fault occurs, and then a component set triggering the fault is confirmed by using logical deduction. In the invention, from the conflict recognition to the generation of candidate diagnosis, the whole operation process is simple and needs short time, and the discrimination and positioning of the system on a fault point does not depend on the experience of an operator or an expert, thereby the limitations of the traditional diagnosis method are overcome.