Acoustic emission is the most direct and sensitive characterization of grinding interference. Therefore, to ensure high-precision grinding, acoustic emission signals were used to evaluate the degradation in grinding performance of a diamond wheel. A fused silica grinding experiment was conducted using a newly trimmed diamond grinding wheel to record the acoustic emission signal and surface morphology of the grinding wheel during its life cycle. A wavelet packet analysis was used to determine the typical low-frequency band of the abrasive wear of the grinding wheel. The frequency energy ratio was then extracted by using principal component analysis to characterize the degradation of grinding wheel grinding performance. The results showed that the acoustic emission frequency energy ratio was completely independent of the processing parameters. As the abrasive wear of the grinding wheel intensified, both the proportion of large-scale rupture and the amplitude of the corresponding low-frequency characteristic increased. When the abrasive particles were worn to the limit, the abrasive grain was broken to produce a new cutting edge, improving the removal ability of the grinding wheel, but the variance of the spectrum was significantly increased, inhibiting the wheel from maintaining a stable quality in ultra-precision machining. The variation of the white pixel ratio of the grinding wheel shape image verified the correctness of the acoustic emission signal analysis results.