Fault diagnosis and tolerance are crucial for monitoring system health and ensuring stability in industrial processes. Challenges arise in designing fault diagnostic solutions for real-time industrial processes with inherent nonlinear dynamic behaviors, particularly when dealing with multiple operating regions characterized by varying dynamics. This article addresses this challenge and proposes a fault diagnostic and tolerant control scheme for industrial systems. The proposed approach integrates a fuzzy-based realization technique with a subspace-aided methodology to effectively handle the nonlinear dynamic behavior observed across different operational scenarios. A practical solution is presented, significantly reducing the computational burden associated with online diagnostics, as the parity vectors are computed offline using available input–output data for different operating regions. During online diagnostics, only computed parity spaces are used with fuzzy realizations for residual generation, leading to a significant reduction in online computation. Numerical examples demonstrate the effectiveness of the proposed method, achieving a high precision rate in fault diagnostics. Furthermore, the diagnostic methodology is integrated with fault-tolerant control for practical applications, as demonstrated in the application of a continuous stirred tank reactor. This integration enables the system to effectively tolerate faults and ensure sub-optimal operation of the industrial process.