A new method of analyzing faults in the m measurements of an nth-order system is presented. The proposed approach uses the estimation error space of each observer in a bank of observers to detect and isolate sensor faults. The designs are applied to a nonlinear model of an unmanned aircraft that has been described in previous publications. The reconfigurability of the aircraft sensor system is demonstrated, and the results show rapid recovery from a faulty sensor. The use of the observation error eliminates the need for state-space computations, thus producing an effective real-time fault monitor for fly-by-wire aircraft. N an earlier paper,1 a comparison of two techniques of instrument fault diagnosis (IFD) was made. This work is an extension of Patton and Willcox's idea of using analytical redundancy to design a match between m components of the observation error space instead of using state estimates di- rectly as discussed by Clark,3'4 Clark and Setzer,5 Frank and Keller,6 and Watanabe and Himmelblau.7 IFD in dynamic systems has received a significant amount of attention recently.211 Most methods described in the liter- ature discuss the analytical redundancy approach in prefer- ence to the use of redundant hardware. Analytical redundancy provides redundant (estimate) information from different measurements of a process, usually with observer or Kalman filter schemes. The commonly discussed state estimate solu- tion to IFD is based on the principle of generating estimates of part or all of the system state vector from subsets of the measurements, which when compared with similar estimates from other observers can be used to monitor the health of an instrument. The problem with the state estimate solution to IFD arises as the observer requires a good linear model of the process, and it must also be assumed that the disturbances on the system are well modeled or else have an insignificant effect on plant parameter variations. These limitations cause the state estimate approach to be inadequate for many real en- gineering applications. Sensitivity to input-induced parameter variations causes uncertain errors between redundant state estimate vectors, and in an IFD scheme these errors could cause false signaling of an instrument fault. It becomes clear that the bandwidth of uncertain signals should be estimated prior to the IFD system design. The use of frequency domain sensitivity information in this way enables a robust approach to the observer design to be made. The conjecture used is that the innovations or prediction error signals contain all the information concerning the parameter variations of the pro- cess being identified and controlled. Attention is thus turned toward the use of an innovations-based approach to system fault diagnosis that has wide potential applications. By using a weighting of the measurement estimation error as a parity