A fuel ball detecting method and system with a self-diagnosis function are provided. The method includes: exciting a first detecting coil and a second detecting coil of a fuel ball sensor disposed outside a pipeline; obtaining a first voltage signal U1 from the first detecting coil and a second voltage signal U2 from the second detecting coil; processing U1 and U2 by differential amplification, band pass filtering, phase sensitive detection and low pass filtering by a signal processor to obtain a fuel ball waveform signal U0; determining whether the fuel ball passes the pipeline according to U0 by a single chip microcomputer; determining whether the first and the second detecting coils, the signal processor and the single chip microcomputer work normally; outputting a result showing whether the fuel ball passes the pipeline, when the first and the second detecting coils, the signal processor and the single chip microcomputer work normally.