A new method for mixed level defect-oriented fault simulation of Digital Systems represented with Decision Diagrams (DD) is proposed. We suppose that a register transfer level (RTL) information along with gate-level descriptions for RTL blocks are available. Decision diagrams (DDs) are exploited as a uniform model for describing circuits on both levels. The physical defects in the system are mapped to the logic level and are simulated on the mixed gate- and RT levels. The approach proposed allows to increase the accuracy of test quality estimation, and to reduce simulation cost in comparison to traditional gate-level fault simulation methods.