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The main purposes of this paper concern residual generation based on analytical redundancy relations for sensor fault detection and isolation of steam generator. These relations are used to detect and isolate sensor fault based on the elimination of the unknown variables of the system. The nonlinear system of steam generator modeled in state space form is linearized around operating point linear analytical redundancy relations are generated by using parity space technique through individual observability of each sensor. This approach will be called "modified parity space approach". The residuals computed on line show the effectiveness of this method.