Many systems are comprised of components equipped with self-testing capability; however, if the system is complex involving feedback and the self-testing itself may occasionally be faulty, tracing faults to a single or multiple causes is difficult. Moreover, many sensors are incapable of reliable decision-making on their own. In such cases, a signal processing front-end that can match inference needs will be very helpful. The work is concerned with providing an object-oriented simulation environment for signal processing and neural network-based fault diagnosis and prognosis. In the toolbox, we implemented a wide range of spectral and statistical manipulation methods such as filters, harmonic analyzers, transient detectors, and multi-resolution decomposition to extract features for failure events from data collected by data sensors. Then we evaluated multiple learning paradigms for general classification, diagnosis and prognosis. The network models evaluated include Restricted Coulomb Energy (RCE) Neural Network, Learning Vector Quantization (LVQ), Decision Trees (C4.5), Fuzzy Adaptive Resonance Theory (FuzzyArtmap), Linear Discriminant Rule (LDR), Quadratic Discriminant Rule (QDR), Radial Basis Functions (RBF), Multiple Layer Perceptrons (MLP) and Single Layer Perceptrons (SLP). Validation techniques, such as N-fold cross-validation and bootstrap techniques, are employed for evaluating the robustness of network models. The trained networks are evaluated for their performance using test data on the basis of percent error rates obtained via cross-validation, time efficiency, generalization ability to unseen faults. Finally, the usage of neural networks for the prediction of residual life of turbine blades with thermal barrier coatings is described and the results are shown. The neural network toolbox has also been applied to fault diagnosis in mixed-signal circuits.