This paper considers fault detection and estimation issues for a class of nonlinear systems with uncertainty, using an equivalent output error injection approach. A particular design of sliding mode observer is presented for which the parameters can be obtained using LMI techniques. A fault estimation approach is presented to estimate the fault and the estimation error is dependent on the bounds on the uncertainty. For a special class of uncertainty, a fault reconstruction scheme is presented where the reconstructed signal can approximate the fault signal to any accuracy. The proposed fault estimation/reconstruction signals are only based on the available plant input/ouput information and can be calculated on-line. Finally, a simulation study on a robotic arm system is presented to show the effectiveness of the scheme. (C) 2007 Elsevier Ltd. All rights reserved.