Helicopter is a complicated system which is made of various elements that are closely communicating with each other. Any kind of fault in this system could create multiple deficiencies such as human and economic damages. Therefore, it is necessary to design a mechanism to detect the faults in order to accomplish the required proceedings. Different techniques in creating fault diagnosis units have been suggested. In this thesis we focus on creating the aforementioned unit based on the idea of state observer methods. The idea of using observer in fault diagnosis units is based on dynamic model of helicopter. Most of the works that has been done in fault diagnosis in helicopter are based on linear or nonlinear models with limited degrees of freedom. As a result, a comprehensive model with the highest degree of freedom is employed. Helicopter control and stabilization is done using back-stepping methodensures bounded tracking of the system states in the presence of structural uncertainties. Existence of structural uncertainties in the structure of a helicopter causes difficulties in fault diagnosis, so adaptive threshold is applied to overcome such problems. The fault diagnosis unit that is designed in this thesis has been used in the incidence of fault in flap actuators. The resulting fault model is performance degradation faults or multiplicative faults. Also, extended observers are used to isolate the occurred faults. Since there are several state variables which can indicate us where the fault happens, only some are used to detect and isolate them. Keywords : Helicopter, Back-stepping control, Fault Diagnosis and Isolation, FDI in helicopter, Actuator faults