This paper investigates the output feedback control problem of a class of nonlinear systems with sensor noise and actuator degradation. Firstly, by using the descriptor observer approach, the origin system is transformed into a descriptor system. On the basis of the descriptor system, a novel Proportional Derivative (PD) observer is developed to asymptotically estimate sensor noise and system state simultaneously. Then, by designing an adaptive law to estimate the effectiveness of actuator, an adaptive observer-based controller is constructed to ensure that system state can be regulated to the origin asymptotically. Finally, the design scheme is applied to address a flexible joint robot link problem.