To achieve a more desirable fault diagnosis accuracy by applying multi-domain features of vibration signals, it is significative and challenging to refine the most representative and intrinsic feature components from the original high dimensional feature space. A novel dimensionality reduction method for fault diagnosis is proposed based on local Fisher discriminant analysis (LFDA) which takes both label information and local geometric structure of the high dimensional features into consideration. Multi-kernel trick is introduced into the LFDA to improve its performance in dealing with the nonlinearity of mapping high dimensional feature space into a lower one. To obtain an optimal diagnosis accuracy by the reduced features of low dimensionality, binary particle swarm optimization (BPSO) algorithm is utilized to search for the most appropriate parameters of kernels and K-nearest neighbor (kNN) recognition model. Samples with labels are used to train the optimal multi-kernel LFDA and kNN (OMKLFDA-kNN) fault diagnosis model to obtain the optimal transformation matrix. Consequently, the trained fault diagnosis model implements the recognition of machinery health condition with the most representative feature space of vibration signals. A bearing fault diagnosis experiment is conducted to verify the effectiveness of proposed diagnostic approach. Performance comparison with some other methods are investigated, and the improvement for fault diagnosis of the proposed method are confirmed in different aspects.