We present in this paper a differential-geometric approach to the problem o
f fault detection and isolation for nonlinear systems. A necessary conditio
n for the problem to be solvable is derived in terms of an unobservability
distribution, which is computable by means of suitable algorithms. The exis
tence and regularity of such a distribution implies the existence of change
s of coordinates in the state and in the output space which induce an "obse
rvable" quotient subsystem unaffected by all fault signals but one, For thi
s subsystem, a fault detection filter is designed.