This article focuses on the design problem of fault detection (FD) observer for a class of continuous-time nonlinear systems. The <inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$\mathcal {H_{-}}$ </tex-math></inline-formula> index is employed to measure the worst cast fault sensitivity. First, the nonlinear systems are represented by the Takagi–Sugeno (T–S) fuzzy dynamic models. Then, a novel fuzzy Lyapunov function (FLF) analyzing approach is proposed to reduce the conservatism in stability analysis and <inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$\mathcal {H_{-}}$ </tex-math></inline-formula> index estimation for the T–S fuzzy model. In particular, employing this new type of the FLF, the stability analysis of the T–S fuzzy systems perfectly overcomes the difficulty of evaluating the upper bound of the time derivative of the membership function. Based on the descriptor system approach, some new sufficient conditions on the existence of fuzzy FD observers are obtained in terms of linear matrix inequalities (LMIs). Finally, illustrative examples are given to show the effectiveness of the proposed method.