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The problem of fast active fault-tolerant control is studied using adaptive fault diagnosis observer (AFDO). Existence conditions for linear time-invariant system are first introduced to verify whether or not the adaptive observer for fault diagnosis exists. Then a novel fast adaptive fault estimation (FAFE) algorithm is proposed to enhance the performance of fault estimation. Using the on-line obtained fault information, the observer-based fault tolerant controller based on the separation property is designed to compensate for the loss of actuator effectiveness by stabilising the closed-loop system. Furthermore, an extension to a class of nonlinear systems is extensively investigated. Finally, simulation results are presented to illustrate the efficiency of the proposed techniques.