This paper describes a fault detection and fault handling algorithm to be used in a longitudinal vehicle cruise control systems. The fault diagnosis system consists of two structures to generate proper residuals and to find that which component has a fault. A systematic design of the fault diagnosis system using model-based techniques is presented. A linear observer is used to create a set of signals sensitive to faults in a radar sensor. The fault handling system consists of two structures to compensate for faults and degraded system performance. Simulation results show that the algorithm is effective for a fault diagnosis and handling in a longitudinal vehicle cruise control system.