A numerical simulation of a two-stage reciprocating compressor has replicated the operations of the compressor under various conditions for the development of diagnostic features for predictive condition monitoring. The simulation involves the development of a mathematical model of five different physical processes: speed-torque characteristics of an induction motor, cylinder pressure variation, crankshaft rotational motion, flow characteristics through valves and vibration of the valve plates. Modelling both valve leakage and valve spring deterioration has also been achieved. The simulation was implemented in a MATLAB environment for an efficient numerical solution and ease of result presentation. For normal operating conditions, the simulated results are in good agreement with the test results for cylinder pressure waveforms and crankshaft instantaneous angular speed (IAS). It has been found that both the IAS fluctuation and pressure waveform are sensitive detection features for compressor faults such as valve leakage and valve spring deterioration. However, IAS is preferred because of its non-intrusive measurement nature. Further studies using the model and experiments are being undertaken in order to develop fault detection features for compressor driving motors and transmission systems.