This article presents a performance evaluation of a flexible manufacturing system (FMS), in which the system and its components can have different performance levels ranging from perfect functioning to total failure. An original multistate transition process for the FMS’s main component, Computerized Numerical Control (CNC) machine tools, proposed in the current article and treated as an aging process because of its increasing failure rate is investigated. The Markov reward approach is utilized to analyze the availability of CNC machine tools and sensitivity analysis of each non-operational state to the machine’s downtime. To overcome the “state explosion problem” in the subsequent FMS performance evaluation process, an application of the Lz-transform method is proposed to determine the performance evaluation and availability of such aging multistate FMS. An illustrated case is presented to demonstrate the performance evaluation process. The results show that the suggested methods can be implemented in engineering decision making and construction of various aging multistate FMS related to demands, availability, and output performance.