In this study, an observer based decentralized Fuzzy Adaptive Controller (FAC) is designed for a class of large scale non-affine nonlinear systems with unknown functions of the subsystems and interactions. The proposed controller has the following main characteristics: 1) On-line adaptation of both controller and observer parameters, 2) stabilization of the closed loop system, 3) convergence of both tracking and observer errors to zero, 4) boundedness of all signals involved, 5) being prone to employing experts' knowledge in controller design procedure, 6) chattering avoidance. An illustrative example is given to show the promising performance of the proposed method.