The Integration and commissioning of AAL systems are time consuming and complicated. The lack of interoperability of available components for Ambient Assisted Living has to be considered as an obstacle for innovative SMEs. In order to ease integration and commissioning of systems knowledge based methods should be taken into account to enable innovative characteristics of AAL systems such as design automation, self-configuration and self-management. Hence, semantic technologies are suitable instruments which offer the capability for mastering the problems of interoperability of heterogeneous and distributed systems. As an important prerequisite for the emergence of knowledge-based assistance functions a standard for unambiguous representation of AAL-relevant knowledge has to be developed. In this paper, the development of an AAL-ontology is proposed as a formal basis for knowledge-based system functions. A prototype of an AAL specific ontology engineering process is presented through the modeling example of a formal representation of a sensor block which is part of an AAL-Integration Profile proposed by the RAALI consortium.