Assimilation of cost-effective fault detection and diagnosis (FDD) technique in building management system can save enormous amount of energy and material. In this paper, recursive autoregressive exogenous algorithm is used to develop dynamic FDD model for variable air volume (VAV) air handling units. A methodology, based upon frequency response of the model is evolved for automatic fault detection and diagnosis. Results are validated with data obtained from a real building after introducing artificial faults. Robustness of the method is further established against sensor errors arising out of faulty bias during long term use or lack of proper commissioning. It is concluded that the method is quite robust and can detect and diagnose several types of faults. A short and simple method is also included in this paper to detect the faults of VAV units operating in the same zone by comparing their behavior. The new method, which requires very small amount of computation time, was tested with the aforementioned database and shows satisfactory results. (C) 2001 Elsevier Science B.V. All rights reserved.