Reaction wheel is the main actuator of micro satellite control system. The failure of reaction wheel would have a strong impact on satellite if it can not be detected. For failure detection of reaction wheel, the model of reaction wheel is established, and then the Matrix Pencil algorithm of the current of wheel is processed, and further average current feature measurement is used to distinguish the characteristic of the wheel failure. The measurement represents the transformation at the stage of failure. To compare with other method, we introduce the wavelet filtering. The simulation results show that the signal processing method based on Matrix Pencil method has significant filtering effect on break signal than normal method.