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Advanced automotive control applications such as steer-by-wire are typically implemented as distributed systems comprising many embedded processors, sensors, and actuators interacting via a communication bus. They have severe cost constraints, but demand a high level of safety and performance. Motivated by the need for timely diagnosis of faulty actuators in such systems, we present a method to achieve distributed failure diagnosis under deadline and resource constraints. Actuators are diagnosed in distributed fashion by processors to provide a global view of their fault status. The integration of software-based tests for actuator diagnosis within the overall control application is studied. These tests are implemented using analytical redundancy and execute concurrently with the control tasks. The test scheduling problem is then formulated and solved to guarantee actuator diagnosis within designer-specified deadlines while meeting control performance goals. As a secondary objective, the scheduling algorithm also reduces the number of processors required for diagnosis. We demonstrate the practicality of the proposed diagnosis approach by applying it to a steer-by-wire example to identify failed actuators in timely fashion.