Vibration signal analysis is one of the most effective ways for condition monitoring of gearboxes. Traditional way is often to mount additional accelerometer sensors on their cases, which has two unavoidable defects: signal-to-noise ratio is often low due to long signal travel paths and it may be not allowable due to space limitations. While embedded diagnostics (ED) can solve these two problems well by embedding sensors close to fault sources. However, embedded sensing design is a great challenge of ED because embedded sensors must have effects on the structure integrity of a gearbox. So it is necessary to determine how to embed sensors in order to ensure normal functions of a gearbox. In this paper, a finite element-based structure analysis method was proposed to perform embedded sensing design of bearings and gears to determine the optimal modified structure size.