Advances in network technologies enable distributed systems, operating in complex physical environments, to co-ordinate their activities over larger areas within shorter time intervals. Some envisioned application domains for such systems are defence, crisis management, traffic management and public safety. In these systems, humans and intelligent machines will, in close interaction, be able to adapt their behavior under changing conditions and situations to reach their common goals. Various architecture models are proposed for such Networking Adaptive Interactive Hybrid Systems (NAIHS) from different research areas such as sensor web technology, sensor fusion, command and control, cognitive science, ergonomics, agent technology, multi-agent systems and robotics. However, most of these models only cover part of the system are too much focussed on specific research areas and use different design philosophies for intelligent systems. In this article a top-down design methodology is proposed that may combine the merits of the various approaches and pave the way to efficient design and effective operation of such systems.