This publication is intended to serve as a key to the results of the research project 'Simulation-based design process of smart machines (KONEMASINA)'. The basic idea of the project was that the simultaneous design of different technical processes is inevitable in order to develop modern, optimized products. The project had three principal themes: simulation-based design, control of machine reliability and operability and the interaction between these two. The project included development of simulation-based design processes and particularly application of computer simulation tools and methods on these processes, and actual modelling- and simulation-related practices in managing complex sub-models as well as an overall system simulation model base. Methods and tools were developed for the use of real-time simulators and virtual technologies in the product development process, such as condition monitoring, operator training and determination of a customer's needs regarding new procedures and products. The practical process of determining dynamic properties of components for simulation work was developed. This study aims to enhanced simulation model with adequate methods and tools focused on an interactive human machine system. A new concept for model- and simulation-based machine operability and reliability was studied. This publication also represents methods for reliability analysis and real time simulation applications, as well as load monitoring applications and solutions for estimating remaining lifetime. Methods to control safety and reliability in product design, applications of probability-based design methods and ways to control various uncertainties were studied.