Failure rate is the frequency with which an engineered system or component fails, expressed in failures per unit of time. It is usually denoted by the Greek letter λ (lambda) and is often used in reliability engineering.

The failure rate of a system usually depends on time, with the rate varying over the life cycle of the system. For example, an automobile's failure rate in its fifth year of service may be many times greater than its failure rate during its first year of service. One does not expect to replace an exhaust pipe, overhaul the brakes, or have major transmission problems in a new vehicle.

In practice, the mean time between failures (MTBF, 1/λ) is often reported instead of the failure rate. This is valid and useful if the failure rate may be assumed constant – often used for complex units / systems, electronics – and is a general agreement in some reliability standards (Military and Aerospace). It does in this case only relate to the flat region of the bathtub curve, which is also called the "useful life period". Because of this, it is incorrect to extrapolate MTBF to give an estimate of the service lifetime of a component, which will typically be much less than suggested by the MTBF due to the much higher failure rates in the "end-of-life wearout" part of the "bathtub curve".

The reason for the preferred use for MTBF numbers is that the use of large positive numbers (such as 2000 hours) is more intuitive and easier to remember than very small numbers (such as 0.0005 per hour).

The MTBF is an important system parameter in systems where failure rate needs to be managed, in particular for safety systems. The MTBF appears frequently in the engineering design requirements, and governs frequency of required system maintenance and inspections. In special processes called renewal processes, where the time to recover from failure can be neglected and the likelihood of failure remains constant with respect to time, the failure rate is simply the multiplicative inverse of the MTBF (1/λ).

A similar ratio used in the transport industries, especially in railways and trucking is "mean distance between failures", a variation which attempts to correlate actual loaded distances to similar reliability needs and practices.

Failure rates are important factors in the insurance, finance, commerce and regulatory industries and fundamental to the design of safe systems in a wide variety of applications.