Polyvinyl chloride (PVC), owing to its excellent electrical properties and low cost, is widely applied in the inner insulation and outer sheath of cables. To achieve early fault warning based on characteristic gases, this study integrates experimental testing with molecular simulations to systematically reveal the decomposition and gas generation characteristics of different PVC layers under electrical and thermal stresses. The results indicate that inner-layer PVC under electrical stress predominantly generates small-molecule olefins and halogenated hydrocarbons, while outer-layer PVC during thermal decomposition mainly produces hydrogen chloride, alkanes, and fragments of plasticizers. The surrounding atmosphere significantly regulates the gas generation pathways: air promotes the formation of CO2 and H2O, whereas electrical discharges accelerate the release of unsaturated hydrocarbons such as acetylene. By employing TG-FTIR, ReaxFF molecular dynamics, and DFT spectral calculations, a normalized infrared spectral library covering typical products was established and combined with the non-negative least squares method to realize quantitative deconvolution of mixed gases. Ultimately, a diagnostic system was constructed based on the concentration ratios of characteristic gases, which can effectively distinguish the failure modes of inner and outer PVC layers as well as different stress types. This provides a feasible approach for early detection of cable faults and supports intelligent maintenance strategies.