In order to solve the security and reliability problems of the system control in the control theory, considering that time-varying delay is widespread in many systems, thinking about solving problems by fault diagnosis and fault-tolerant control, and aiming at the study of fault-tolerant control of nonlinear time-delay singular systems based on fault diagnosis observers, a new fault diagnosis observer is constructed. With the Lyapunov stability theory, the fault diagnosis observer state estimation error is researched. Then, the state feedback fault-tolerant controller is designed. Using Schur lemma and some basic control theories, the sufficient conditions for linear matrix inequality (LMI) existed in fault diagnosis observer and fault tolerant controller are obtained. The closed-loop system is guaranteed to be stable and satisfies the given performance index. Finally, the Matlab simulation example is given to illustrate the simplicity and practicability of the proposed method, which overcomes effectively problems existed in the system such as: nonlinearity, destabilization, and time-varying delay.