A measuring method for the internal stress magnitude and direction of glass was proposed based on the magneto-optical modulation and a stress measuring system was established. On the basis of the ray-tracing method, the system's measurement model was derived according to the Jones matrix describing manner of polarized light. Then, using a magneto-optical modulator, the signal beam was modulated with a sine alternation manner and the direct measurement of the light intensity signal in the traditional method was changed into the frequency signal measurement to improve the measurement veracity greatly. Furthermore, the human operator error was eliminated through a magneto-optical rotator, and the current for driving a coil outside the rotator was controlled to change the rotation angle of modulation signal light in the polarization direction. Finally, a number of rotating measurements to the sample were carried out. The experimental results indicate that the measurement veracities for stress direction, and the stress birefringence are 5" and 0.3 nm/cm, respectively. In conclusions, the system has the characteristics of high stability, high veracity and easy to be implemented in engineering applications.