This paper presents a fault detection and isolation (FDI) scheme for a class of Lipschitz nonlinear systems with nonlinear and unstructured modeling uncertainty. This significantly extends previous results by considering a more general class of system nonlinearities which are modeled as functions of the system input and partially measurable state variables. A new FDI method is developed using adaptive estimation techniques. The FDI architecture consists of a fault detection estimator and a bank of fault isolation estimators. The fault detectability and isolability conditions, characterizing the class of faults that are detectable and isolable by the proposed scheme, are rigorously established. The fault isolability condition is derived via the so-called fault mismatch functions, which are defined to characterize the mutual difference between pairs of possible faults. A simulation example of a single-link flexible joint robot is used to illustrate the effectiveness of the proposed scheme. (C) 2009 Elsevier Ltd. All rights reserved.