AbstractAn attempt is made to design a fault‐tolerant control system using a nonlinear technique, called the state‐dependent Riccati equation (SDRE) method. The proposed mechanism consists of a master controller, an observer‐based fault detection and isolation system, and three emergency controllers, designed using the SDRE methods. The master controller, as a suboptimal nonlinear regulator, is designed to return DC microgrid (MG) to its desired equilibrium point in normal operation condition. On the other hand, an SDRE observer is designed to establish a unified framework for fault detection and isolation in the DC MG. Indeed, in the case of unexpected fault occurrence, the proposed mechanism can isolate the faulty DG, and then, the emergency controllers are triggered immediately to stabilize the MG. Simulation results indicate that the proposed method is so useful to achieve the control objectives and online protection of the considered MG.