The paper presents functional modelling and its application for diagnosis in nuclear power plants. Functional modelling is defined and its relevance for coping with the complexity of diagnosis in large scale systems like nuclear plants is explained. The diagnosis task is analyzed and it is demonstrated that the levels of abstraction in models for diagnosis must reflect plant knowledge about goals and functions which is represented in functional modelling. Multilevel flow modelling (MFM), which is a method for functional modelling, is introduced briefly and illustrated with a cooling system example. The use of MFM for reasoning about causes and consequences is explained in detail and demonstrated using the reasoning tool, the MFMSuite. MFM applications in nuclear power systems are described by two examples: a PWR; and an FBR reactor. The PWR example show how MFM can be used to model and reason about operating modes. The FBR example illustrates how the modelling development effort can be managed by proper strategies including decomposition and reuse.