Performance evaluation of fault-tolerant systems with application to the IUSA new method for quantitatively evaluating the performance of fault-tolerant systems is developed and applied to an example. The method assumes that the random failure and diagnostic decision behavior of the system can be modeled by a finite state Markov process. A performance value must be assigned to each of the states of the model. The method then generates the moments of the probability mass function of the cumulative performance and uses these to generate a maximum entropy approximation to the performance PMF. Some computational considerations are discussed. The method is applied to a typical mission for the Inertial Upper Stage to examine the attitude accuracy performance of the inertial system.