The present disclosure provides a passive optical network (PON) system and a method for protecting the service of the system for service recovery and fault locating in case of a failure of the network, wherein the PON system comprises an optical line terminal (OLT), an optical distribution network (ODN) and an optical network terminal (ONT) equipment protection group comprising a plurality of ONT equipment groups, each of which is connected to at least one of other ONT equipment groups within the ONT equipment protection group for the mutual protection relationship. The PON system of the present disclosure does not require equipment and link redundancy for backup, contributes to reduced cost and improved utilization of resources, and provides a means for diagnosing any faults of the links and equipment in the network.