In this paper, the off-line analysis method is applied to develop three-way catalytic converter (TWC) diagnostic strategy including oxygen sensor (O2 sensor) diagnostic strategy with common narrow band oxygen sensor (EGO sensor) in Matlab/Simulink software. Moreover, Mototron ECU (Engine Control Unit) is used for monitoring catalyst deterioration. However, aged catalyst is difficult to possess so the different catalytic conversion efficiency (CCE) is simulated by using exhaust by-pass valve. The CEC (China Engine Corporation) 1L V2, four stroke, water-cooled engine is selected as target engine to conduct engine dynamometer test. After making sure O2 sensor operates normally, the catalyst diagnostic strategy test is executed. The experimental result shows that the catalyst deterioration accurately can be detected when the failure phenomenon takes place. In order to make sure the robustness of proposed diagnostic strategy, the common diagnostic strategy, switching times and amplitude ratio, is established to compare accuracy of proposed strategy. Shown as result, when the CCE is closed to 50%, the proposed strategy can reduce possible misjudgment.