The topic of this thesis is knowledge discovery and artificial intelligence based knowledge discovery algorithms. The knowledge discovery process and associated problems are discussed, followed by an overview of three classes of artificial intelligence based knowledge discovery algorithms. Typical representatives of each of these classes are presented and discussed in greater detail. Then a new knowledge discovery algorithm, called Hybrid Classifier System (HCS), is presented. The guiding concept behind the new algorithm was simplicity. The new knowledge discovery algorithm is loosely based on schemata theory. It is evaluated against one of the discussed algorithms from each class, namely: CN2; C4.5, BRAINNE and BGP. Results are discussed and compared. A comparison was done using a benchmark of classification problems. These results show that the new knowledge discovery algorithm performs satisfactory, yielding accurate, crisp rule sets. Probably the main strength of the HCS algorithm is its simplicity, so it can be the foundation for many possible future extensions. Some of the possible extensions of the new proposed algorithm are suggested in the final part of this thesis.