A system and method for determining the root cause of a fault in a vehicle system, sub-system or component using models and observations. In one embodiment, a hierarchical tree is employed to combine trouble or diagnostic codes from multiple sub-systems and components to get a confidence estimate of whether a certain diagnostic code is accurately giving an indication of problem with a particular sub-system or component. In another embodiment, a hierarchical diagnosis network is employed that relies on the theory of hierarchical information whereby at any level of the network only the required abstracted information is being used for decision making. In another embodiment, a graph-based diagnosis and prognosis system is employed that includes a plurality of nodes interconnected by information pathways. The nodes are fault diagnosis and fault prognosis nodes for components or sub-systems, and contain fault and state-of-health diagnosis and reasoning modules.