An approach to fault diagnosis for a class of nonlinear systems is proposed in this paper. It is based on a new adaptive estimation algorithm for recursive estimation of the parameters related to faults. This algorithm is designed in a constructive manner through a nontrivial combination of a high gain observer and a recently developed linear adaptive observer, without resort to any linearization. Its global exponential convergence is ensured by an easy-to-check persistent excitation condition. A numerical example is presented for illustration. (C) 2004 Elsevier Ltd. All rights reserved.