Abstract: For adaptive fault diagnosis observer design, the error dynamics is needed to satisfy the strictly positive real (SPR) condition, and uncertain systems containing output disturbances cannot been dealt with well. So a novel augmented fault diagnosis observer design is proposed not only to broaden application scopes of adaptive fault diagnosis observer evidently, but also to cope with system disturbances well. Then, based on the obtained fault information, a dynamical output feedback fault tolerant control design is proposed to avoid design difficulties caused by observer-based state feedback fault tolerant control. Meanwhile, the fault diagnosis observer and output feedback fault tolerant controller are designed separately and their performances are considered simultaneously to simplify design procedures. Finally, simulation results are presented to show the effectiveness of the proposed method.