A new method of fault diagnosis for power networks by using the combinatorial cross entropy (CCE) algorithm is proposed. The research contents in this paper mainly contain the two parts: transmission network fault diagnosis and distribution network fault location. For transmission network, the optimization model is built by considering the relationship among fault elements, action information of protective relays and circuit breakers. For distribution network, constructing fault location model according to the logic relationship between fault current and equipment condition. The optimal solution of two models are solved by CCE algorithm, then fault element (s) in transmission network and fault section (s) in distribution network can be identified by the optimal solution. Various fault conditions are simulated in test system and the results show that conclusions obtained by proposed method are correct, which prove CCE algorithm diagnose fault effectively.