In this paper, an environmental monitoring and diagnosis system based on ubiquitous computing technology, shortly u-Eco Monitoring System, is proposed. u-Eco Monitoring System is designed to: 1) Collect information from the manufacturing processes via ubiquitous computing technology, 2) Analyze the current status, 3) Identify the cause of problem if detected by rule-based and case-based reasoning, and 4) Provide the results to the operator for proper decision making. Based on functional modeling, a generic architecture is derived, followed by application to a manufacturing system in iron and steel making industry. Finally, to show the validity of the proposed method, a prototype is developed and tested. The developed methods can be used as a conceptual framework for designing environmental monitoring and diagnosis system for industrial practices by which monitoring accuracy and response time for abnormal status can be significantly enhanced, and relieving operator pressure from manual monitoring and error-prone decision making.