In this paper, a model-based fault diagnosis scheme of a nonlinear hybrid system using an adaptive unscented Kalman filter (AUKF) bank is proposed. The hybrid system is an amalgamation of discrete dynamics and continuous states. Fault diagnosis for simultaneous occurrences of multiple faults such as leakage fault, clogging fault, sensor fault, and actuator fault on a benchmark three-tank system are simulated. The residual signal based output generates some discrete modes that guarantee the uniqueness of the concerning fault. The efficacy of the proposed scheme is compared with that of the adaptive extended Kalman filter (AEKF) bank on the same system to prove its better response over AEKF.