AbstractThis paper presents a hybrid active–passive approach to fault‐tolerant control (FTC). It combines the existing active fault‐tolerant control techniques with the newly developed passive decentralized unconditionally stabilizing (DUS) control. The FTC system is developed to achieve optimized performance under sensor failures that are most frequently encountered and/or have significant impact on the process, while guaranteeing the stability under any other failures. This approach can significantly reduce the level of complexity of FTC systems, leading to cost‐effective designs. A stability condition for control systems based on reconstructed virtual sensor outputs is developed. The effectiveness of the proposed method is illustrated by control of a distillation column. Copyright © 2006 Curtin University of Technology and John Wiley & Sons, Ltd.