This paper proposes a decentralized adaptive output-feedback controller design for nonlinear interconnected systems with unknown time delays. The interaction terms with unknown delays are related to all states of subsystems. The time-delayed functions are compensated by using appropriate Lyapunov-Krasovskii functionals and function approximation technique. The observer dynamic surface design technique is employed to design the proposed memoryless local controller for each subsystem. In addition, we prove that all signals in the closed-loop system are semiglobally uniformly bounded and control errors converge to an adjustable neighborhood of the origin.