While in NASA's earlier space missions such as Voyager the number of sensors was in the hundreds, future platforms such as the Space Station Freedom will have tens of thousands sensors. For these planned missions it will be impossible to use the comprehensive monitoring strategy that was used in the past in which human operators monitored all sensors all the time. A selective monitoring strategy must be substituted for the current comprehensive strategy. This selective monitoring strategy uses computer tools to preprocess the incoming data and direct the operators' attention to the most critical parts of the physical system at any given time. There are several techniques that can be used to preprocess the incoming information. This paper presents an approach to using diagnostic reasoning techniques to preprocess the sensor data and detect which parts of the physical system require more attention because components have failed or are most likely to have failed. Given the sensor readings and a model of the physical system, a number of assertions are generated and expressed as Boolean equations. The resulting system of Boolean equations is solved symbolically. Using a priori probabilities of component failure and Bayes' rule, revised probabilities of failure can be computed. These will indicate what components have failed or are the most likely to have failed. This approach is suitable for systems that are well understood and for which the correctness of the assertions can be guaranteed. Also, the system must be such that assertions can be made from instantaneous measurements. And the system must be such that changes are slow enough to allow the computation.