This paper deals with the problem of fault tolerant control of nonlinear systems represented by Takagi-Sugeno models subject to sensor faults. Observer based controllers are designed for each faulty-situation (mode). The classical switching law is replaced by a new mechanism which avoid the switching phenomenon. The purpose is to be able to study the stability of the global closed-loop system. This new mechanism uses the residual signals obtained by a residual generator. A bank of observers is designed and each observer uses only one output. Each observer based controller is designed using the estimated state provided by the corresponding observer. Finally, the control law is constructed from these different controllers by using smooth weighting functions depending on the residual signals and satisfying the convex sum property. This last allows to study the stability of the closed-loop system by Lyapunov theory and the tools developed for Takagi-Sugeno systems. Linear Matrix Inequality (LMI) conditions are then proposed to ease the design of a such fault tolerant controller.