This paper introduces a novel approach for mechanical manufacturing system to implement status monitoring and fault diagnosis. The embedded hardware and software framework for terminal device is discussed to ensure high performance, high reliability, high expansibility, low power and small volume. According to the demand of remote status monitoring, the strategy of data transmission and information sharing is applied to provide the analyzing and diagnosing service based on intranet/internet. The artificial intelligent technique is used for information fusion and fault diagnosis of manufacturing system. The proposed approach shows great potential for improving overall production efficiency, while reducing the cost of maintenance.