In recent years, electric vehicles powered by lithium-ion batteries have developed rapidly, and the safety and reliability of lithium-ion batteries have been a paramount issue. Battery management systems are highly dependent on sensor measurements to ensure the proper functioning of lithium-ion batteries. Therefore, it is imperative to develop a suitable fault diagnosis scheme for battery sensors, to realize a diagnosis at an early stage. The main objective of this paper is to establish validated electrical and thermal models for batteries, and address a model-based fault diagnosis scheme for battery sensors. Descriptor proportional and derivate observer systems are applied for sensor diagnosis, based on electrical and thermal models of lithium-ion batteries, which can realize the real-time estimation of voltage sensor fault, current sensor fault, and temperature sensor fault. To verify the estimation effect of the proposed scheme, various types of faults are utilized for simulation experiments. Battery experimental data are used for battery modeling and observer-based fault diagnosis in battery sensors.