The fault estimation and fault‐tolerant control problems of switching stochastic systems with partially unknown nonlinear dynamics, external disturbance, actuator, and sensor faults are studied. A new observer and disturbance observer are constructed to simultaneously estimate the system state, actuator, and sensor faults, as well as modelable disturbances. The dimensions of the proposed adjustable dimension observer are not fixed and can be adjusted within a certain range, and unknown nonlinear dynamics can be decoupled. According to estimated information, fault‐tolerant controller is designed. The sufficient condition is obtained to ensure that the root‐mean‐square gain from the disturbances to the fault reconstruction error is bounded. Finally, two simulation examples are provided to verify the effectiveness of the proposed method.