A novel method is proposed to analyze the stability of fault power system based on time-varying state matrix, since the energy function method cannot analyze the relationship between the time-varying state matrix and the system stability. First, through the state and operation mode of the system at the failure vanishing point, the real-time state matrix after the fault is calculated gradually. Then, the solution of the differential equation is calculated, and the stability of the fault system can be judged based on the stability criterion of the time-varying system. Finally, simulation results of the equivalent two-generator and sixteen-generator system illustrate that the method can accurately analyze the stability of the system when the fault occurs at different position and with different duration time.