Noteworthy work is found in the area of Fault diagnosis for distributed computer networks. Some literature is also available in the area of fault diagnosis for Controller Area Network (CAN) protocol for industrial and automotive applications. CAN protocol lacks the redundancy support for channel or media in its protocol architecture. Thus, there is a need to handle faults at network level for CAN based embedded distributed systems. The Adaptive Fault Diagnosis algorithm for Controller Area Network (AFDCAN) is suggested and implemented by authors for CAN based industrial and automotive networks. This paper demonstrates the implementation of Data Reduction (DR) technique in AFDCAN. 50% reduction in fault diagnostic data and 31.3% average improvement in busload are observed as result of incorporation of DR technique in AFDCAN.