Disclosed herein is a Passive Optical Network (PON) system and method for detecting a fault in an Optical Network terminal (ONT). The PON system for detecting a fault in an ONT includes a plurality of ONTs for outputting optical signals in time slots allocated thereto in a time division access control manner and having at least one virtual ONT. An Optical Line Terminal (OLT) receives the optical signals output from the plurality of ONTs in the time division access control manner, and then detects a faulty ONT.According to the present invention, a faulty ONT that continuously outputs signals can be detected and action can be rapidly taken against system faults when a virtual ONT is formed in a plurality of ONTs connected to an OLT and then an optical signal in the section of the virtual ONT is detected, thus providing a reliable service.