This paper presents a new FDI scheme based on dynamic fuzzy model(DFM) for the unknown nonlinear system, which can detect and isolate process faults continuously over all ranges of operating condition. The dynamic behavior of a nonlinear process is represented by a set of local linear models. The parameters of the DFM are identified by an on-line methods. The residual vector of the FDI system is consisted of the parameter deviations from nominal model and the set of grade of membership values indicating the operating condition of the nonlinear process. The detection and isolation of faults are performed via a neural network classifier that are learned the relationship between the residual vector and fault type. We apply the proposed FDI scheme to the FDI system design for a two-tank system and show the usefulness of the proposed scheme.