The detection, diagnosis, and accommodation of system failures or degradations is becoming increasingly more important in modern engineering problems. This paper presents a general framework for constructing automated fault diagnosis and accommodation architectures using on-line approximators and adaptation/learning schemes. In this framework, neural network models constitute an important class of on-line approximators. Changes in the system dynamics are monitored by an on-line approximation model, which is used not only for detecting but also for accommodating failures. A systematic procedure for constructing nonlinear estimation algorithms and stable learning schemes is developed and illustrated by a simulation example.