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In this paper, a new approach to estimation of unknown inputs and faults in a class of nonlinear systems is presented. The approach is based on the design of a cascade connection of two sliding mode observers. The first is used for estimation of state and unknown inputs and the second is used for fault detection. An important feature of the proposed approach is that the state trajectories do not leave the sliding manifold even in presence of unknown disturbances and faults. This allows for faults and disturbances to be reconstructed based on information retrieved from the equivalent output injection signal. The proposed approach is tested on a nonlinear model of vertical take-off and landing (VTOL) system to reconstruct unknown disturbances and faults.