Abstract Since the seminal work of Sampath et al. in 1996, despite the subsequent ?ourishing of techniques on diagnosis of discrete-event systems (DESs), the basic notions of fault and diagnosis have been remaining conceptually unchanged. Faults are de?ned at component level and diagnoses incorporate the occurrences of component faults within system evolutions: diagnosis is context-free. As this approach may be unsatisfactory for a complex DES, whose topology is organized in a hierarchy of abstractions, we propose to de?ne different diagnosis rules for different subsystems in the hierarchy. Relevant fault patterns are speci?ed as regular expressions on patterns of lower-level subsystems. Separation of concerns is achieved and the expressive power of diagnosis is enhanced: each subsystem has its proper set of diagnosis rules, which may or may not depend on the rules of other subsystems. Diagnosis is no longer anchored to components: it becomes context-sensitive. The approach yields seemingly contradictory but nonetheless possible scenarios: a subsystem can be normal despite the faulty behavior of a number of its components (positive paradox); also, it can be faulty despite the normal behavior of all its components (negative paradox).