The reliability evaluation of logic circuits is an essential step in the computer-aided design flow of emerging integrated circuits (IC). Due to the increased process variation effects in submicron IC technologies, reliability evaluation should include the transistor-level faults’ modeling and analysis. In this paper, a two-step reliability evaluation method was developed. In the first step, the gate error probability (in a matrix form) was computed based on transistor fault modeling. In the second step, the circuit’s graph was traversed in topological order. Meanwhile, for each gate, the probability of the gate’s output to be in 16 possible states was computed using the gate error probability matrix (calculated in the first step) and the corresponding gate inputs’ probability matrices. The reliability of the circuit’s outputs was extracted from the related 16-state probability matrix. Furthermore, the reconvergent fan-out problem was handled using the concept of correlation coefficients. Various simulations were performed on ISCAS 89 and LGSynth91 benchmark circuits. Compared with MonteCarlo as a reference method, the results indicated a < 3% average error on reliability estimation. Furthermore, the estimation error and algorithm runtime of the proposed method significantly decreased in comparison with some state-of-the-art methods.