In this paper, the applicability of the source localisation method in Acoustic Emission (AE) technique to determine the crack locations in masonry is investigated. A series of pencil-break tests are performed on a two-span masonry arch bridge. Because of the layered structures, the assumption of homogeneous material and uniform velocity field in the classical method for concrete is not suitable in the masonry structures. The velocity is not uniform but shows a downdraught with the increasing distance due to the layered material structure. Based on this property, a modified AE source localization method is proposed. The modified factor in the model greatly reduces the effect of the inhomogeneity. The testing results from the pencil breaks and the central pier settlement tests highlight the effective of the modified method.