An acousto-optic laser heterodyne vibration measurement system is designed and built，which is made up of an optical part and a signal processing part.This system is verified experimentally，and the results show that relative errors for the vibration frequency at 10~100 Hz，100~1000 Hz，1~10 kHz band are less than 0.15%，0.07% and 0.03% respectively，and it decreases with the increasing of frequency.The output signal amplitude increases with the increasing of driving voltage amplitude，showing a good amplitude response.In addition，the vibration waveform and spectrum are measured and recorded of small rotating machinery in the condition of normal and fault.The measurement results show that when this rotating machinery operates with a failure，the vibration waveform shows a significant change.The spectrum analysis results show that the spectrum amplitude is smaller in the 175~250 Hz band and new spectral components are produced in 250~350 Hz band，these results show the the feasibility of this system in the monitoring of fault for small rotating machinery.