The DX SYSTEM of Diagnostic Testing is an easy-to-use computerized system for developing and administering diagnostic tests. A diagnostic test measures a student's mastery of a specific domain (skill or content area). It examines the necessary subskills hierarchically from the most to the least complex. The DX SYSTEM features tailored testing with immediate student feedback. In addition teachers can obtain an immediate student performance profile, plus additional information to help diagnose and remediate a student's problems. This manual provides detailed directions for operating the DX SYSTEM on an Apple II computer. The steps include: (1) "booting up"; (2) making a back-up copy; (3) the menu; (4) how to enter test items; (5) administering the test; and (6) how to obtain test results for individual students. In addition it describes six steps for developing diagnostic tests and test items: (1) developing a blueprint of the domain; (2) mapping prerequisite skills for the target domain; (3) developing a hierarchy or sequence of skills; (4) writing test items using common conventions of item writing; (5) reviewing the test items; and (6) field testing the items. (BS)