With regard to the complex structure of the inertial navigation system and the low rate of fault detection with BITE (built-in test equipment), a fault diagnosis system for INS based on virtual technologies (virtual instrument and virtual equipment) is proposed in this paper. The hardware of the system is a PXI computer with highly stable performance and strong extensibility. In addition to the basic functions of digital multimeter, oscilloscope and cymometer, it can also measure the attitude of the ship in real-time, connect and control the measurement instruments with digital interface. The software is designed with the languages of Measurement Studio for VB, JAVA, and CULT3D. Using the extensively applied fault-tree reasoning and fault cases makes fault diagnosis. To suit the system to the diagnosis for various navigation electronic equipments, the modular design concept is adopted for the software programming. Knowledge of the expert system is digitally processed and the parameters of the system's interface and the expert diagnosis knowledge are stored in the database. The application shows that system is stable in operation, easy to use, quick and accurate in fault diagnosis.