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This paper deals with the problem of fault detection and isolation for nonlinear systems. The proposed approach is based on nonlinear disturbance decoupling techniques and nonlinear observers. First, we give sufficient conditions and a design procedure for the synthesis of residual generators. Next, we characterize a class of nonlinear systems for which a high gain observer can be designed. Finally, the two above developments are illustrated through a real application dealing with the detection and isolation of three failures in a hydraulic process. The design of the residual generators is shown and their performances are discussed.