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In this paper we present an application of a Digital Signal Processor (DSP) system to detect and isolate a water-leak. The programmed algorithm is based on a Sensitivity Model-Based Approach. The DSP system is tested on-line in a water pipeline prototype. The model used to design the algorithm to isolate the leak is obtained from a Preissmann Scheme. An adaptive estimation of the friction factor is incorporated to attain real-time isolation. Comments about the implementation are given. The estimation results of the leak size and leak position are presented.