Anomaly occurrences in hydraulic machinery might lead to massive system shut down, jeopardizing the safety of the machinery and its surrounding human operator(s) and environment, and the severe economic implications following the faults and their associated damage. Hydraulics are mostly placed in ruthless environments, where they are consistently vulnerable to many faults. Hence, not only are the machines and their components prone to anomalies, but also the sensors attached to them, which monitor and report their health and behavioral changes. In this work, a comprehensive applicational analysis of anomalies in hydraulic systems extracted from a hydraulic test rig was thoroughly achieved. First, we provided a combination of a new architecture of LSTM autoencoders and supervised machine and deep learning methodologies, to perform two separate stages of fault detection and diagnosis. The two phases were condensed by—the detection phase using the LSTM autoencoder. Followed by the fault diagnosis phase represented by the classification schema. The previously mentioned framework was applied to both component and sensor faults in hydraulic systems, deployed in the form of two in-depth applicational experiments. Moreover, a thorough literature review of related work from the past decade, for autoencoders related fault detection and diagnosis in hydraulic systems, was successfully conducted in this study.