In this article, the problem of multiple fault detection, isolation and reconfiguration of the rolling mill main drive system containing external disturbances is investigated. Considering the nonlinear frictional damping between the rolls and the rolled parts, a nonlinear mathematical model of the main drive system of the mill is established. A comprehensive fault diagnosis scheme based on observer is addressed for this system subjected to unknown external interference. The proposed scheme is divided into two parts. In the first stage, a set of sliding mode observers is designed for system fault detection, and a fault isolation criterion is proposed based on observer redundancy and generalised residual set theory to reveal the fault source. In the second stage, combined with the iterative learning algorithm, an iterative learning-unknown input observer is constructed to realise the accurate estimation of the fault signal. Unlike the existing fault estimation methods, the iterative learning-unknown input observer designed in this article uses the state estimation error of the previous iteration to estimate the fault signal in the current iteration period. Using [Formula: see text] synthesis to design observers for the system will guarantee fault diagnosis robustness. The Lyapunov theory and linear matrix inequality are introduced to prove the convergence of the proposed observer. The simulation study of a 1780-mm hot strip mill evaluates the proposed scheme. Simulation results demonstrate that the sliding mode observer approach can detect faults in the main drive system and isolate faults accurately. In contrast, the iterative learning-unknown input observer method has the lowest fault reconfiguration error (99.87% smaller than the extended state observer, 99.77% smaller than the unknown input observer) and achieves accurate fault signal tracking.