The fault frequencies are as they are and cannot be improved. One can only improve its estimation quality. This paper proposes a fault diagnosis method by combining local mean decomposition (LMD) and the ratio correction method to process the short-time signals. Firstly, the vibration signal of rolling bearing is decomposed into a series of product functions (PFs) by LMD. The PF, which contains the richest fault information, is selected to perform envelope spectrum analysis by the Hilbert transform (HT). Secondly, the Hilbert envelope spectrum of the selected PF is corrected with the ratio correction method. Finally, higher precision fault frequencies are extracted from the corrected Hilbert envelope spectrum, and then the fault location is accurately determined. The proposed method of this paper can be used in online real-time monitoring technology of rolling bearing failure.