For systems with both state and input time delays, a novel state and sensor fault observer is proposed in this paper to estimate system states and sensor faults simultaneously. In this design, a descriptor system approach and a linear matrix inequality technique are adopted, where the considered sensor fault may be in any form, even unbounded. 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 reliable observer-based controller is proposed, which makes the system work well nomatter whether sensor faults occur or not. The present approaches are next extended to the case for systems with multiple time delays. Finally, a simulation example of the network of three cascaded reactors is used to illustrate the design procedure and demonstrate the efficiency of the present techniques.