There exist some problems when the fractal feature method is applied to identify thruster faults for autonomous underwater vehicles (AUVs). Sometimes it could not identify the thruster fault, or the identification error is large, even the identification results are not consistent for the repeated experiments. The paper analyzes the reasons resulting in these above problems according to the experiments on AUV prototype with thruster faults. On the basis of these analyses, in order to overcome the above deficiency, an improved fractal feature integrated with wavelet decomposition identification method is proposed for AUV with thruster fault. Different from the fractal feature method where the signal extraction and fault identification are completed in the time domain, the paper makes use of the time-domain and frequent-domain information to identify thruster faults. In the paper, the thruster fault could be mapped multisource and described redundantly by the fault feature matrix constructed based on the time-domain and frequent-domain information. In the process of identification, different from the fractal feature method where the fault is identified based on fault identification model, the fault sample bank is built at first in the paper, and then pattern recognition is achieved by calculating the relative coefficients between the constructed fault feature matrix and the elements in the fault sample bank. Finally, the online pool experiments are performed on an AUV prototype, and the effectiveness of the proposed method is demonstrated in comparison with the fractal feature method.