This article addresses the performance-based fault detection (FD) and fault-tolerant control (FTC) issues for nonlinear systems. For this purpose, in the first part of this article, the performance-based FD and FTC scheme is investigated with the aid of the nonlinear factorization technique. To be specific, the controller parameterization for nonlinear systems is first discussed. The so-called fault-tolerant margin is introduced as an indicator of the system fault-tolerant ability. Then, the FD scheme aiming at estimating and detecting the stability performance degradation of the closed-loop system caused by the system faults is developed. Furthermore, to recover the system performance, the performance-based FTC strategy is presented. In the second part of this article, the design approach of the performance-based FD and FTC scheme is studied by applying the Takagi-Sugeno fuzzy dynamic modeling technique. The achieved results are demonstrated in the end by a case study on the three-tank system.