The production processes in the packaging materials industry has to be very efficient and cost-effective. These processes usually take place under extreme conditions and high speeds that requires a high level of reliability and efficiency. Rollers including their supporting bearings and motors are the most common components of production machines in the packaging materials industry. Bearing faults, which often occur gradually, represent one of the foremost causes of failures in the industry. Therefore it is very important to take care of bearings during maintenance and detect their faults in an early stage in order to assure safe and efficient operation. We present a new automated technique for early fault detection and diagnosis in rolling-element bearings based on vibration signal analysis. After normalization and the wavelet transform of vibration signals, the standard deviation as a measure of average energy level and the logarithmic energy entropy as a measure of the degree of order/disorder are extracted in a few sub-bands of interest as representative features. Then the feature space dimension is optimally reduced to two using scatter matrices. In the reduced two-dimensional feature space the fault detection is performed by a quadratic classifier and the fault diagnosis by another two quadratic classifiers. Accuracy of the new technique was tested on the ball bearing data recorded at the Case Western Reserve University Bearing Data Center. In total four classes of the vibrations signals were studied, i.e. normal, with the fault of inner race, outer race and balls operation. An overall accuracy of 100% was achieved. The new technique can be used to increase reliability and efficiency by preventing unexpected faulty operation of machinery bearings.