We present a new scan-BIST approach for determining failing vectors for fault diagnosis. This approach is based on the application of overlapping intervals of test vectors to the circuit under test. Two MISRs are used in an interleaved fashion to generate intermediate signatures, thereby obviating the need for multiple test sessions. The knowledge of failing and non-falling intervals is used to obtain a set S of candidate failing vectors that includes all the actual (true) failing vectors. We present analytical results to determine an appropriate interval length and the degree of overlap, an upper bound on the size of S, and a lower bound on the number of true failing vectors; the latter depends only on the knowledge of failing and non-failing intervals. Finally, we describe two pruning procedures that allow us to reduce the size of S, while retaining most true failing vectors in S. We present experimental results for the ISCAS 89 benchmark circuits to demonstrate the effectiveness of the proposed scan-BIST diagnosis approach.