Modular design has played an important role in design and manufacturing of machine tools. With the fast development of modern industry and the appearance of the computer integrated manufacturing system (CIMS), modular design has been developed aiming at the automatic and intelligent design. It is well known that intelligent layout becomes the bottleneck of intelligent design of mechanical products. In this paper, combined with the scheme design, an intelligent layout design methodology is proposed to solve the modular design of machine tools. The authors analyze the properties of modular design, and present the object-oriented representation of layout design knowledge. The techniques of expert system, redesign based on constraints reasoning, parametric solid modeling, and automatic assembly are studied, and the design model, problem-solving strategy, and system architecture are set up. An example is given for the applications.