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the paper is one of the few attempts to develop a Product Service System (PSS) ontology aiming to facilitate Knowledge Management in collaborative PSS design, focusing upon machine industry. The PSS ontology includes concepts such as products, services, PSS, PSS lifecycle, process and stakeholders, including direct customers, consumers and their feedback. The context sensitivity approach is proposed to fully support the use of different tools for PSS development by various stakeholders. The context model includes both PSS ontology and a so-called usercentric ontology. The process to develop the ontologies is described. The approach to build the PSS ontology is based on the so-called Basic Formal Ontology (BFO). The foreseen applications of both ontologies in industrial practice of machine vendors and the expected benefits are being elaborated.