The closed loop feedback control system of an Automated Manual Transmission (AMT) electro-pneumatic clutch actuator is used for intelligent real time condition monitoring, enhanced diagnostics and prognostic health management of the dry clutch system, by integrating with the existing gearbox prognostics observer. The real-time sensor data of the clutch actuator piston position is analyzed for monitoring the condition of the clutch system. Original parameters of the new clutch are stored in the Electrically Erasable Programmable Read-only Memory (EEPROM) of the AMT controller and the real-time data is used by the observer for assessing the degradation/wear of the frictional clutch parts. Also, clutch slip during torque transmission is monitored, using the engine speed and the gearbox input shaft speed from Controller Area Network (CAN). Condition monitoring of clutch system provides enhanced prognostic functionality for AMT system which ensures consistent clutch performance, gear shift quality and timely warning for recalibration, repair and/or replacement of the critical wear and tear parts. Also, systematic analysis of the monitored data provides an accurate diagnosis of a developing fault. Thus, with the advanced control systems in place for AMT, a closed loop feedback based condition monitoring system is modelled for improved diagnostics and prognostics of AMT clutch system.