This study concentrates on the fault-tolerant control and fault estimation problems for a class of descriptor stochastic systems with state-dependent faults. A new extended observer method is presented to solve these design problems. First, the descriptor stochastic system is transformed into a non-singular system, and an augmented system is constructed by assembling the fault states into the augmented vector. Then, a novel sliding mode observer with two discontinuous input terms is designed to estimate the states and faults of system. A state-feedback control scheme based on the state estimates is synthesised to guarantee the closed-loop systems stable. Finally, a numerical example is presented to show the effectiveness of the proposed design approach.