Grounding grids are the guarantee of substation running safety. The fault of grounding grids is a threat to people and equipment in substations. A method to diagnose the fault of grounding grids based on magnetic field inverse problem. The inverse problem of magnetic field is established by injecting and extracting a low frequency current. The morbid of inverse problem is solved through regularization and Newton iteration method to obtain the distribution of the mesh currents. The approximate distribution of the magnetic field is calculated to diagnose the fault of the grounding grid. A 4×4 substation grounding grids is taken as an example. By comparison of the forward problem result, the error is under 3%, so the prposed method of inverse problem is verified. The selection of measurement point is discussed, and 40% of the number of meshes is accounted to approximate the real distribution of the magnetic field on the grounding grids.