This paper presents a rigorous approach to automatic generation of schematic diagrams for digital systems described as networks of modules. This is very useful in comprehensive CAD environment. The approach is based on identification of some guidelines which are traditionally followed in manual drawing of schematic diagrams. Theses guidelines are transformed into quantitative objectives. In view of the complex interrelationship between these objectives, the schematic design process is broken into a long sequence of steps. An attempt is made to give rigorous formulation for each step, along with efficient solutions, making suitable approximations where necessary. An illustrative diagram generated using these algorithms is included showing that the results compare well with hand drawn diagrams.