Electro-hydraulic actuators (EHAs) have been widely used in modern industries. However, sensor faults and actuator faults in EHA systems can arise due to aging during operation, making the system unstable and unsafe. To solve these issues, fault-tolerant control (FTC) techniques for EHA systems have been studied intensively. In this paper, an FTC is proposed and developed for the mini motion package (MMP) EHA system. First, a mathematical model of the MMP system is formulated and improved to provide position tracking control using a well-known proportional-integral-derivative (PID) controller. Second, an unknown input observer (UIO) reconstruction is performed to estimate the states, disturbances, and sensor faults so that an asymptotically stable control error can be obtained by a linear matrix inequality (LMI) optimization algorithm through Lyapunov’s stability condition. Third, the FTC designed for the nonlinear discrete-time system is formed from fault compensation based on a residual logic signal to implement the fault compensation process and ensure stability and tracking performance with respect to minimizing impacts of disturbances and sensor faults. Here, residual is defined by the difference between state response and state estimation. Finally, numerical simulations and experiments of the MMP system are presented to illustrate the efficiency of the proposed FTC technique.