This paper considers the problem of condition-based maintenance optimization for complex industrial assets involving load sharing interaction and fault propagation among their components using a two-tiered approach. The upper layer represents the deterioration and failure at the asset level and uses a continuous-time Markov chain to calculate the optimal inspection interval and maintenance threshold. The model is mathematics tractable. We illustrate a numerical example with closed-form solutions for a simple case. The lower layer models the load sharing interaction and fault propagation, and in turn calculates the deterioration rates and failure rates to be used in the lower layer. We derive a partitioning rule to transform the lower layer model into the layer model’s format. Hence we are able to reduce the size of state space and circumvent the state space explosion problem.