In processing plants, sensor and/or actuator failures can have considerable deteriorating effect on the closedloop performance. Such failures have to be diagnosed online, as quickly as possible, and actively accommodated to arrest the performance degradation. Active failure tolerance can be achieved by employing model-based failure diagnosis techniques and redesigning/restructuring controller online. In this work, a sensor/actuator failure isolation strategy has been developed under the linear generalized likelihood ratio (GLR) framework. The strategy is then extended to isolation of sensor and actuator failures in nonlinear systems. The infomation on sensor/actuator failures is further used for online reconfiguration of the state estimator and the controller/ control scheme. In case of sensor failure, the state estimator is reconfigured by removing the measurement of failed sensor from the measurement vector. If an observability property is preserved after sensor failure, then an inferential control scheme is employed subsequent to the failure. When an actuator failure is isolated, it is proposed to make modifications in the controller objectives or switch to a new controller to account for the loss of a degree of freedom. The efficacy of the proposed failure diagnosis and control structure reconfiguration schemes is demonstrated by conducting experimental studies on a benchmark heater mixer set up. Analysis of these results reveals that the proposed strategies are able to isolate the failures accurately and recover the closed-loop performance by online reconfiguration of the controller/control scheme.