This paper describes a fuzzy model-based diagnostic system and its application to the cooling system of a diesel engine. The aim is to develop generic cost-effective knowledge-based techniques for condition monitoring and fault diagnosis of engine systems. A number of fuzzy systems have been developed to model the cooling system components. Residuals are generated on line by comparison of measured data with model outputs. The residuals are then analysed on line and classified into a number of fuzzy classes symptomatic of potential system conditions. A fuzzy rule-based system is designed to infer a number of typical fault conditions from the estimated state of the valve and patterns in the residual classes. The ability to diagnose certain faults in the system depends on the state of the thermostatic valve. The diagnostic systems have been tested with data obtained by experimental simulation of a number of target fault conditions on a diesel generator set test bed. In five test cases for separate cooling system operating conditions, the diagnostic system's successful diagnosis rate ranged between 73 and 97.7 per cent of the test data.