This paper presents a concept for building up a distributed monitoring and diagnosis system for complex industrial applications. For this purpose, a hierarchical organized model with distributed, cooperating agents was developed. The hierarchical aspect guarantees a predictable behaviour of the system with a high performance and the flexibility of the system is ensured by the federal distribution (Bongaerts 1998 Bongaerts L 1998 Integration of scheduling and control in holonic manufacturing systems PhD thesis PMA/KULeuven, Chapter 3. ). By using this approach, a modular component diagnosis and monitoring (CDM) system is realized that enables the integration of legacy monitoring and diagnostic tools, specific to the application area. Universal applicable mechanisms were found to perform diagnostic processes and to improve the quality of a diagnosis by handling different diagnostic mechanisms in parallel and by applying conflict resolution algorithms. This software architecture for monitoring and diagnosis was developed by the University of Karlsruhe in cooperation with three industrial partners and one research institute within the framework of the EU Esprit Program: ‘DIAMOND: DIstributed Architecture for MONitoring and Diagnosis’ (DIAMOND 2002).