To handle the decentralized fuzzy adaptive outputfeedback fault-tolerant control problem for nonlinear switched large-scale systems with sensor faults and unknown control gains, a decentralized fault-tolerant control (FTC) strategy is proposed. As only the actual outputs are measurable when the sensor faults occur, a novel state observer is designed to estimate unmeasured states and address unknown control gains simultaneously. The unknown nonlinear functions are approximated by fuzzy logic systems. Based on the backstepping technique and the average dwell time method, decentralized FTC controllers are designed. It is proven that all states of the closed-loop system are semiglobal uniformly ultimately bounded and the tracking errors can converge to a small neighborhood of zero. A simulation example is presented to show the effectiveness of the developed strategy.