An acoustic emission (AE) monitoring system with real time noise reduction function using a spectral subtraction (SS) process was developed, in order to monitor AE in a noisy environment. To evaluate the noise reduction performance of the SS, we monitored artificial AE signals in various noise environments. The S/N ratio of the AE signal in background noise, which includes electrical noise of a pre-amp and/or an A/D converter, was improved by 18.4dB using the SS process. Periodic noise was reduced and the S/N ratio increased to 40dB. We also reduced the noise with wide frequency band and the S/N ratio increased by 8-10dB. We then monitored the cylinder wave AE signals produced by a pencil lead breaking in the noise generated by the air flow in the pipe. The system improved the S/N ratio of the AE signal by 9.2dB and was able to detect AE signals.