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The problem of fault-tolerant control for a class of nonlinear time-delay systems is investigated based on the observer technique. An adaptive observer and adaptive fault-tolerant controller are designed in proposed approach. Firstly, the adaptive observer is utilized to give a real time estimation of the fault. Then, an adaptive fault-tolerant controller is designed according to the estimation of the fault. The asymptotic stability of the closed-loop system is proved by Lyapunov theory both in normal case and fault case. Finally, the simulation results of the aircraft example illustrate that this method is effective and feasible.