Internal structural changes in yarns directly affect yarn tensile fracture behavior. The acoustic emission (AE) technique plays a crucial role in dynamically monitoring the internal structural changes of stressed materials. In this paper, an acoustic emission signal analysis method during the whole process of yarn tensile fracture is proposed to study the yarn tensile fracture behavior and mechanical properties from the internal microscopic changes. Tensile fracture tests and acoustic emission tests were carried out to investigate the behavioral properties of yarns during the whole process of stretching from both macroscopic and microscopic perspectives and to compare the results with those of conventional acoustic emission amplitude analysis. The effects of the selection of key parameters of Shannon entropy (window width and bin width) and external noise on the yarn stretching behavior were investigated. The mechanical properties of different yarns were characterized by the entropy changes in different stretching stages compared with the analysis results of conventional mechanical property tests. The results show that compared with the AE amplitude, the Shannon entropy can extract the weak AE signal under high background noise and effectively characterize the yarn tensile fracture behavior. In addition, key parameters were shown to affect the yarn tensile fracture behavior. Further, the entropy change when the yarn is subjected to stretching reflects the change in mechanical properties of the yarn and the difference in mechanical properties of different yarns.