Developing and maintaining context-aware efficient systems in heterogeneous environments is a challenging task. In our research work, we enable context awareness in users, devices, and applications to enable context-based systems in Ambient Networks. We achieve this by proposing a context dissemination system which propagates the fast evolving context information from its sources (e.g., context sensors) to various interested information sinks (e.g., context sensitive clients). The proposed system implements a context aware overlay architecture composed of multi-level overlay networks. This overlay architecture acts as a base (middleware) for the development and maintenance of the application-layer context-specific dissemination protocol (the CSON-D protocol). The protocol's multi-level overlay structure and its intelligence, personalization, and fault tolerance features exhibit adaptive behavior with minimized casting functionality. Our conceptual model is reinforced by means of experimental evaluations. In general, the cost-based overhead for multi-level overlay formation and maintenance is minimal.