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A new approach is proposed for active fault tolerant control systems (FTCS), which allows one to explicitly incorporate allowable system performance degradation in the event of partial actuator fault in the design process. The method is based on model-following and command input management techniques. The degradation in dynamic performance is accounted for through a degraded reference model. A novel method for,selecting such a model is also presented. The degradation in steady-state performance is dealt with using a command input adjustment technique. When a fault is detected by the fault detection and diagnosis (FDD) scheme, the reconfigurable controller is designed automatically using an eigenstructure assignment algorithm in an explicit model-following framework so that the dynamics of the closed-loop system follow that of the degraded reference model. In the mean time, the command input is also adjusted automatically to prevent the actuators from saturation. The proposed method has been evaluated using the lateral dynamics of an F-8 aircraft against actuator faults subject to constraints on the magnitude of actuator inputs. Very encouraging results have been obtained.