A vapor recovery system used with fuel dispensers and having error detection capabilities incorporated therein for detecting vapor leaks and performance deficiencies in the vapor recovery system. The vapor recovery system includes a fuel nozzle connected to a fuel source for pumping fuel into a vehicle. A vapor transfer line is connected to the nozzle and has a connected pump which pumps fuel vapor from the nozzle through the vapor transfer line and into a vapor holding tank. A pair of test valves are connected in the vapor transfer line on opposite sides of the pump and are used to isolate selected sections of the vapor recovery system for test purposes. Connected between each test valve and pump is a pressure sensor for measuring pressure in the vapor transfer line. A digital processor is connected to the vapor recovery system to control the vapor recovery system and to place the vapor recovery system in various test modes. During the test modes, the digital processor receives pressure signals from the pressure sensors and compares these pressure signals to references to determine if a fault condition exists.