Fault Isolation / Failure Analysis (FI/FA) of increasingly complex embedded memory in microprocessors is becoming more difficult due to process scaling and presence of subtle defects. As physical failure analysis (PFA) is destructive and involves expensive and time-consuming processes, fault diagnosis needs to be as precise as possible to ensure successful physical defect sighting. This paper introduces a cache Fault Isolation methodology that focuses on exhaustive data collection to derive concrete hypothesis of physical fault location and to overcome the existing FA/FI challenges. The methodology involves a novel application of existing DFT techniques in combination with circuit analysis, pattern hacking, defect localization and PFA tools. Some of the techniques, for example pattern modification or circuit simulation, are applied repeatedly in order to obtain higher-level of isolation – from cell/logic level to transistor/gate level, and finally down to physical structure/layer level. This multi-level FI approach is the key to localize the failing area to greater precision, which had proven itself in Intel Itanium® II processor yield improvement process.