Abstract. This article discusses automatic identifications of functional structures of artifacts from given behavioral models of components and their connection information (called functional understanding). We propose an ontology of functional concepts which provides a rich vocabulary representing functions together with clear definitions grounded on behavior. The ontology enables the understanding system to limit the search space at functional level and to screen out meaningless interpretations. Furthermore, the ontology includes a new category of functional concepts named meta-function representing conceptual categories of relationship between functions. It plays a crucial role in consolidation of functions to give criteria of grouping functions, that is, identity of consolidated functions. It enables the understanding system to generate such functional hierarchies that do not correspond to physical structure.