A diagnostics/prognostics system and related method for collecting and processing data relating to a plurality of subsystems of a dynamic system includes a plurality of sensors, each sensor gathering data and generating a data signal indicative of the health of a corresponding one of the subsystems. In addition, the diagnostics/prognostics system includes a plurality of subsystem modules coupled to corresponding ones of the sensors for generating a subsystem health signal in response to corresponding ones of the data signals. Further, a master diagnostics module is coupled to the subsystems to generate an overall system health signal in response to the subsystem health signals. Preferably, the master diagnostics module includes a memory having an embedded model to facilitate generating the overall system health signal and a related trend analysis. Preferably, a controller is used to generate a control signal in response to at least one of a group consisting of the subsystem health signals and the vehicle health signal, the control signal causing an operation parameter of at least one of the subsystems to change. The diagnostics/prognostics system is especially well suited for vehicles, but can also be applied to other dynamic systems.