In this paper, a new model-based approach to leakage localization in drinking water distribution networks is proposed. In particular, a method for generating a set of structured residuals for water distribution networks systems is presented. Non-linear static equations are typically used in the modeling of such systems. Unfortunately, these non-linearities prevent explicit solutions and thus the subsequent analytical expressions of the residuals are not feasible. For this reason, the residual computation procedure presented here uses a numerical solver based on an enhanced Newton-Raphson algorithm. Moreover, because the water distribution networks usually present a high degree of interconnection between nodes, good leak isolability properties can easily be obtained by applying the proposed residual generation method. Nevertheless, not fully leak detection and isolation can always be achieved, thus a methodology for the analysis of leak diagnosis is also presented in this paper. To show the applicability and the potential of the proposed approach, the structured residual generators are tested on a real water network model and compared with another existing method based on directional residuals. Finally, the results of the two methods are combined in order to obtain the best of both methods.