Collision of tools would result in precision reduction of the precise mechanical spindle. The frequency domain characteristics of the faulty spindle vibration signal were obtained by the vibration signal monitoring. Then, the fault characteristic frequency of bearings under different fault modes was calculated based on spindle structure and the bearing characteristic parameters. Finally, fault position of the spindle was located based on the relationship between the fault characteristic frequency and the frequency of the monitoring vibration signal. The effectiveness of the developed fault location method was verified by spindle disassembly and accuracy tests. The experimental results show that the damage in the inner and outer rings of the angular contact ball bearing is the fault source to decrease the spindle precision; the fault location result based on the theoretical method is consistent with the results from disassembly test positioning method. After using a new bearing, the spindle precision test result returns to normal, which further verifies the effectiveness of the developed fault location method.