Abstract: A basic conception of a so-called failure self-diagnosis system is presented in this paper, i.e. based on a priori information and measurements of some states and parameters of a system, the residual and failure signature matrix are computed by a computer so as to form the distinguishable projection operators (DPO). Failure detection and isolation logic is used to determine if the system is operating in order and the locations of the failure and to compensate the effect of the failure. So the system possesses the capability of failure autodiagnosis The sufficient and necessary conditions for the existence DPO have been proved and the method to generate DPO is given. A failure switch filter is presented. Thus, computation can be reduced, and the filter is kept in optimum condition when the system is in normal case and it is more sensitive to unexpected changes in case of failure. The digital computation results show the effectiveness of these methods.