From the student feedback questionnaire, some students opined that the concepts of fluid mechanics are quite abstract and that they have difficulty in grasping the phenomena in real life situation. Hence, it demands some innovative learning methodologies to help arouse their interest. This paper depicts the development and implementation of an interactive teaching package on learning of basic fluid mechanics with a knowledge-based system approach. The prototype package is designed to guide engineering students in self-directed learning through the processes of interaction, reflection, and application, thus furnishing an opportunity of stimulating pedagogical environment. Diagnostic assessment is undertaken for every scenario of possible prompted answer on a specific topic, so as to evaluate the most probable shortfall or misconception of that particular student.