Intelligent fault diagnosis techniques play an important role in improving the abilities of automated monitoring, inference, and decision making for the repair and maintenance of machinery and processes. In this article, a modified stacked autoencoder (MSAE) that uses adaptive Morlet wavelet is proposed to automatically diagnose various fault types and severities of rotating machinery. First, the Morlet wavelet activation function is utilized to construct an MSAE to establish an accurate nonlinear mapping between the raw nonstationary vibration data and different fault states. Then, the nonnegative constraint is applied to enhance the cost function to improve sparsity performance and reconstruction quality. Finally, the fruit fly optimization algorithm is used to determine the adjustable parameters of the Morlet wavelet to flexibly match the characteristics of the analyzed data. The proposed method is used to analyze the raw vibration data collected from a sun gear unit and a roller bearing unit. Experimental results show that the proposed method is superior to other state-of-the-art methods.