Wayside acoustic defective bearing detector (ADBD) system is a potential technique in ensuring the safety of traveling vehicles. However, Doppler distortion and multiple moving sources aliasing in the acquired acoustic signals decrease the accuracy of defective bearing fault diagnosis. Currently, the method of constructing time-frequency (TF) masks for source separation was limited by an empirical threshold setting. To overcome this limitation, this study proposed a dynamic Doppler multisource separation model and constructed a time domain-separating matrix (TDSM) to realize multiple moving sources separation in the time domain. The TDSM was designed with two steps of (1) constructing separating curves and time domain remapping matrix (TDRM) and (2) remapping each element of separating curves to its corresponding time according to the TDRM. Both TDSM and TDRM were driven by geometrical and motion parameters, which would be estimated by Doppler feature matching pursuit (DFMP) algorithm. After gaining the source components from the observed signals, correlation operation was carried out to estimate source signals. Moreover, fault diagnosis could be carried out by envelope spectrum analysis. Compared with the method of constructing TF masks, the proposed strategy could avoid setting thresholds empirically. Finally, the effectiveness of the proposed technique was validated by simulation and experimental cases. Results indicated the potential of this method for improving the performance of the ADBD system.