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In this paper, we develop a hybrid approach for fault diagnosis in hybrid systems assuming that multiple faults may occur in both continuous dynamics and at the discrete level. In this approach, a diagnoser is designed for a discrete-event-system (DES) abstraction of the system. The DES abstraction is modified such that the actual condition of the system always remains a subset of the condition estimate provided by the DES diagnoser. Whenever the DES diagnoser fails to provide a certain condition for the system (or it is deemed to be necessary), a continuous diagnoser consisting of a bank of residual generators becomes active. Since the continuous dynamics is not used at all times for diagnosis, our approach reduces the online computing requirements of the diagnosis system. We also model a typical spacecraft propulsion system as a hybrid automaton and explain how our results can be applied to it.