The paper proposes a novel computer-aided model-based system engineering process for Smart Gird applications. The process is supported by the SysGrid tool that plays the roles of system configurator and device configurator. The design process starts with single line diagrams which are automatically transformed to executable function block specifications. The process is based on the Smart Grid control architecture that is a heterogeneous network of controllers communicating in a peer to peer manner. This “artificial nervous system” of the Smart Grid will be capable of self-healing and dynamic adaptation to renewable generation and ever-changing loads. The tool supports system-level design of automation logic in the form of function block networks with compliancy to IEC 61499. The capabilities of SysGrid are demonstrated through the process of designing a distributed protection application.