For systems with multiple time delays, a novel state and sensor noise observer is designed to estimate system states and sensor noises at the same time. In this design, descriptor system approach and linear matrix inequality technique are adopted. Unbounded sensor faults will make the system fail unavoidably, it is indispensable to derive a reliable control scheme against sensor failures. Using the estimated state and sensor fault, a fault-tolerant observer-based controller is proposed, which makes the system work well not matter whether sensor faults occur or not.