This paper addresses the actuator failure identification problem of microsatellites in a stabilized feedback framework. An adaptive failure identification scheme is developed using multiple estimators and cost functions to identify the failed actuators for understanding vehicle health and protecting microsatellites. For the implementation of failure identification, an adaptive failure compensation scheme is developed using an uncertainty decomposition to guarantee the system stability and asymptotic tracking properties, and a special reference motion is also provided using a linearly independent condition. After some actuators have failed, both identification and control are applied, and the control, while stabilizing the system, makes the microsatellite engage in the provided special motion so that the failed actuators can be identified by the identification algorithm. Simulation results illustrate the effectiveness of the proposed adaptive failure identification and compensation schemes.