In this paper, a new approach to the detection of localized defects of rolling element bearings is proposed. It employs matching pursuit with time-frequency atoms to analyze bearing vibration and extract vibration signatures. In particular, this approach utilizes not only the temporal and spectral but also the scale characteristics of the vibration generated due to the presence of a defect for the detection. This leads to a high signal-to-noise ratio and facilitates considerably the detection at the early stage of failure development. Experimental results show that the proposed approach is sensitive and reliable and works better than continuous wavelet transform and envelope detection.