A method of diagnosing level sensor failure in a fuel cell water trap, the method may include: determining whether a water level of a level sensor is changed in a fuel cell water trap, adding an amount of charge according to an operating time and comparing the added amount of charge with a preset threshold amount of charge, according to the result of the forcibly opening a drain valve according to determining whether a channel voltage of a specific channel is abnormal as the result of the comparison, and diagnosing a failure of the level sensor according to determining whether the channel voltage of the specific cell is recovered as a normal state when the drain valve is opened.