Fault detection and isolation (FDI) is a task to deduce from observed variable of the system if any component is faulty, to locate the faulty components and also to estimate the fault magnitude present in the system. This paper provides a systematic method of fault diagnosis to detect leak in the three-tank process. The proposed scheme makes use of structured residual approach for detection, isolation and estimation of faults acting on the process [1]. This technique includes residual generation and residual evaluation. A literature review showed that the conventional fault diagnosis methods like the ordinary Chisquare (ψ2) test method, generalized likelihood ratio test have limitations such as the "false alarm" problem. From the results it is inferred that the proposed FDI scheme diagnoses better when compared to other conventional methods

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