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This paper presents an approach to detect faults in a hydrostatic drive chain by means of an online recursive parameter estimation. A mechatronic model of a hydrostatic drive chain is derived with focus on single components that are composed to an overall model suitable for fault detection and identification. Assuming that faults will lead to parameter changes, this contribution proposes a least square algorithm with exponential forgetting capable of detecting faults online. Results of thorough simulation studies emphasize the performance of the algorithm and will conclude this article.