Accurate localization is crucial in the navigation of mobile robots. However, in other circumstances, single-sensor localization faces different challenges, including software and hardware problems or data outages. Sensor fusion is used in most autonomous vehicles (including aerial and ground vehicles) to overcome such challenges. In this paper, the localization of a mobile robot is studied in the presence of sensor faults. The mobile robot has two sensors: two Inertial Measurement Units (IMU) and wheel encoders. Regarding the fault-tolerant scheme, measurements of both sets of sensors are fused using an Interacting Multiple Model (IMM) Kalman filter based on both unscented and extended Kalman filters (UKF and EKF). UKF and EKF-based IMM are chosen for this study since the dynamic model of the localization is highly nonlinear. Regarding contributions, it should be noted that this scheme eliminates the need to model every single fault scenario and use an additional sensor to oversee the performance of the sensing system. Also, comparing this method with similar approaches adopted by other studies shows better performance regarding the cost of computations and RMSE. To evaluate performance, the outputs of the proposed filters are simulated and compared for different trajectories where the data of each sensor is intentionally corrupted to observe the fault detection capability. Simulations are performed for different trajectories and noises to demonstrate this method’s efficiency in different situations. In addition, the results of unscented and extended Kalman filter-based IMM are compared in terms of error and computational costs to evaluate their performance. Overall, simulation and experiments indicate accurate 3D estimations in all cases. Moreover, designated weights vividly show that sensor fault detection is achieved by both unscented and extended IMM Kalman filters, which enable complete fault isolation consequently. This approach provides mobile robots with a reliable and straightforward sensor fault detection and localization solution.