Due to the design of the circular knitting machines, it is not possible to see the faults on the fabric as soon as they occur. Faults become only as seen after some piece of, around 50 to 60 cm long, fabric is knitted. This situation causes loss of time and material for the manufacturers. In this article, a system that detects the faults that may occur during the production on circular knitting machines and automatically power off the machine upon detection of any fault is introduced. The developed on-line fault detection system combines and implements several state of the art methods available in the literature and in the industry. The system is a product of a multidisciplinary study, including textile engineering, signal and image processing, electrical engineering.