The world is facing an ageing population phenomenon, coupled with health and social problems, which affect older people’s ability to live independently. This situation challenges the viability of health and social services. Smart home technology can play a significant role in easing the pressure on caregivers, as well as reduce the financial costs of health and social services. Activity of Daily Living (ADL) recognition is an essential step to translate sensor data into activities at high semantic levels. Supervised Machine Learning (ML) algorithms are the most commonly used techniques for this application. However, a common problem is a lack of availability of enough annotated data to train these algorithms. Collecting annotated data is expensive, time consuming, and may violate people’s privacy. Intra- and inter-personal variation in performing complex activities is another challenge for an ML-based activity recognition approach. In this paper, a multi-layered knowledge-based architecture for recognising ADL in real-time is proposed. At the first stage, sensor data is pre-processed; events that describe changes in the environment are detected at the second stage, in which the sequence of events is used to recognise more semantically complex activities at the third stage. A new ADL ontology is proposed to model the knowledge related to the sensor platform and the targeted activities as the previously proposed ontologies were either designed to deal with specific sensor data, or they ignored the context environment information which is important in recognising complex activities.