A modern-day vehicle consists of more than a hundred Electronic Control Units (ECU) for controlling various electrical parameters. Hence diagnostics of these ECUs are very tedious and vital to identify the cause of the systems' failure and reduce the risk of failure. Unified Diagnostics Services (UDS) protocol defined in the standard ISO-14229 is used for vehicle diagnostics in the automotive industry. Also, diagnostics software complexity increases due to a rise in the demand for multiple functionalities. This doubles the difficulty of developing and testing software during the product development phase, as many time hardware is not available for validation and testing of the software. Hence testing and validation without hardware in the virtual environment is a must in early development phases to reduce the development period. The proposed tool-chain in this paper focuses on creating the virtual environment for testing and validation of the diagnostics software developed by using AUTOSAR standard in the automotive industry. Diagnostics software is implemented on the virtual ECU generated using UDS protocol, and results are presented.