In this paper, a distributed fault estimation observer (DFEO) is designed for multi-agent systems in the finite-frequency domain. The DFEO consists of a network of local fault estimation observers corresponding to each agent. Here communication topology is described as a graph with loops. By using the generalized Kalman–Yakubovich–Popov lemma, the proposed DFEO is designed to avoid the overdesign problem generated by the entire-frequency domain. Furthermore, the design conditions for DFEO are formulated as linear matrix inequalities. Finally, compared with the
H
∞
approach in the entire-frequency domain, the proposed DFEO design approach shows better performance in numeral simulations of satellites attitude synchronization.