A diagnostic method for gas-path faults of turbofan engines, relying on a Probabilistic Neural Network (PNN) coupled with a thermodynamic model of the engine, is presented. The novel aspect of the method is that its training information is generated dynamically by an accompanying Engine Performance Model. In the proposed approach, the PNN efficiently addresses the first step of a diagnostic process (i.e., detection of the faulty component at the current operating point), while with the aid of an adaptive engine model, the fault is then further isolated and identified. A description of the proposed method and training aspects of the PNN are presented. The method is applied to the case of a mixed-flow turbofan engine to diagnose common gas-path faults in compressors and turbines (i.e., fouling, FOD, erosion, and tip clearance). Its performance is evaluated using realistic fault data that may be acquired at various operating conditions within a flight envelope.