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Machine failures in manufacturing systems interrupt production operations and cause production loss. The conventional methods for failure prevention are to perform preventive maintenance before .failure occurs, hi these methods, a fixed maintenance threshold (FMT) is obtained using the lifetime distribution of each machine. This threshold can then be used to trigger maintenance work-orders. A problem with the conventional technique is that it does not consider the updated state of the system, which continues to change before and after maintenance. Therefore, unnecessarily high costs can be incurred due to unexpected equipment failure (lack of maintenance) or excessive maintenance. In this paper, a reliability-based dynamic maintenance threshold (DMT) is calculated based on the updated equipment status. The benefits of the DMT are demonstrated in a numerical case study on a drilling process. The results illustrate that the maintenance policy using the DMT can reduce unscheduled downtime, increase equipment availability, and utilize the equipment remaining useful life more effectively than a conventional FMT-based maintenance policy. [DOI: 10.1115/1.3123340] Keywords: reliability modeling, dynamic maintenance threshold, condition-based maintenance