Although holonic manufacturing systems (HMS) are recognized as a paradigm to cope with the changes in manufacturing environment based on a flexible architecture, development of reconfiguration mechanism is required to realize the advantages of HMS. Finding a solution from scratch to deal with changes in HMS is not an appropriate approach as it may lead to chaos at the shop floor. The objective of this paper is to propose a viable design methodology to achieve effective reconfiguration in HMS based on the cooperation of holons. We formulate and study a holarchy reconfiguration problem and define an impact function to characterize the impact of resource failures on different holons in a holarchy. A collaborative reconfiguration algorithm based on the impact function is proposed to effectively reconfigure the systems to achieve minimal cost solutions. (C) 2009 Elsevier Ltd. All rights reserved.