The relative significance of upstream design activity to downstream design activity is widely recognized, due to its critical role in determining the final product’s functionality. Although there are now some general methodologies dealing with functions or reasoning about functions, virtually no commercial CAD system can support functional design. In functional modeling, a design problem is represented in a hierarchy of functions and the behaviors that realize the functions. This paper presents a functional design methodology based on a behavior-driven function-environment-structure (B-FES) modeling framework to guide functional design through functional reasoning steps including causal behavioral reasoning (CBR) and functional decomposition. The proposed functional design starts from a set of design specifications including functional requirements and design constraints, and results in diverse behavioral schema corresponding to a set of design alternatives. A design example for functional design of a terminal cut-off unit in an automatic assembly system is used to provide a demonstration of the proposed functional design methodology. / Singapore-MIT Alliance (SMA)