A system and method for propagating fault information in an Ethernet OAM network having multiple levels of OAM domains. An Alarm Indication and Suppression (AIS) frame is generated by a Maintenance Intermediate Point (MIP) node upon detecting a fault condition in a first OAM domain, which is transmitted to one or more Maintenance End Points (MEPs) of the first OAM domain. Upon receiving the AIS frames, the MEP nodes are operable generate another AIS frame for propagating to an adjacent higher level second OAM domain. Responsive to the AIS frame from the lower level first OAM domain, any alarms caused in the second OAM domain due to the fault condition in the first OAM domain are suppressed.