To improve the rationality of failure diagnosis, this research uses hypergraph theory as basis in proposing a method of analysing failure propagation behaviour to study the failure propagation mechanism from the system perspective. A hierarchical structure model is constructed by failure correlation analysis, matrix transformation and decomposition. The probability of failure is determined by considering the influence of multiple truncation data. On this basis, hypergraph theory is used to calculate the one-step and cumulative coefficient of failure propagation and diffusion. The influence degree of failure is calculated by integrating the edge betweenness. Using the influence degree of failure as an indicator, failure propagation and diffusion behaviour are analysed, and critical failure nodes and paths are identified. Lastly, a machining centre is used as an example for specific application. The results are compared with the ranking results of critical failure propagation paths determined by other methods, and the effectiveness of the proposed method is verified.