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The main focus of this paper is on the analysis and design scheme of performance-based fault detection and fault-tolerant control for automatic control systems with incipient (slowly developing) multiplicative faults. To this end, the realization form of the multiplicative faults is first studied with the aid of the coprime factorization techniques. Then, the fault-tolerant margin is proposed in the closed-loop setup aiming at characterizing the fault-induced performance degradation. By embedding the fault-tolerant margin as a performance indicator, a performance-based fault detection approach is developed. Based on the fault detection and the well-known controller parameterization form, a control performance-based fault-tolerant control strategy is investigated. A case study on three-tank system is given in the end to illustrate the proposed approaches.