The development of on line model-based fault detection systems in machinery improves the operational reliability of industrial systems and reduces the operational and maintenance costs. In this direction, this paper presents the use of modelling information to determine changes in characteristics from measured data for the fault detection purpose of hydraulic driven machines as well as for the compensation of incipient faults where applicable. For this purpose a suitable implementation environment was developed that allows the on line interaction of real time data and simulation results and makes possible their direct effect to the actual system.