Abstract: A knowledge-based system (10) which combines case-based reasoning, heuristic search and deductive rule application. The resulting inference engine is sensitive to the context of problem solving. The system (10) includes a heuristic searcher (22), a case memory (14), a rule memory (18), a rule applier (26) and a case matcher (24). The rule applier (26) uses stored rules to elaborate on new cases by deriving new features so that it will be closer to selected old cases. The case matcher (24) detects how close selected cases are to the new case and generates a score for the match. The heuristic searcher (22) maintains a plurality of elaborated cases and determines the goodness of each elaborated case, the goodness being a measure of the match between the elaborated case and the selected old case.