This paper describes a method of fault-tolerant control schema for vehicle lateral dynamics. Firstly, the given nonlinear model of the vehicle is represented by an uncertain Takagi-Sugeno fuzzy model. Using the LMI formulation, the T-S fuzzy model scheme is used to design an output feedback observer-based controller, a method is then investigated for detection, isolation and accommodation of sensor faults. Simulations show that the sensor faults are detected immediately after their occurrences.