The open-circuit fault of the power switches in shunt active power filter (SAPF) would exacerbate the harmonic pollution of power grid, and degrade the reliability of the devices and system. A fault diagnosis method is proposed based on reference model and an over-modulation strategy under hardware fault tolerance for SAPF. First, a mathematic model is established for SAPF. Second, the residuals are generated by comparing the outputs of reference model and those of actual model, and open-switch fault is detected and diagnosed by residual evaluation. After that, hardware fault tolerance is performed with the three-phase four-switch (TPFS) topology to isolate the faulty phase. Finally, the over-modulation strategy is proposed to increase the voltage transfer ratio of the TPFS topology. Simulation and experimental results verified the feasibility and effectiveness of the proposed method.