This paper deals with the simultaneous estimation of states and unknown inputs for a class of Lipschitz nonlinear systems using only the measured outputs. The system is assumed to have bounded uncertainties that appear on both the state and output matrices. The observer design problem is formulated as a set of linear constraints which can be easily solved using linear matrix inequalities (LMI) technique. An application based on manipulator arm actuated by a direct current (DC) motor is presented to evaluate the performance of the proposed observer. The observer is applied to estimate both state and faults. This paper deals with the simultaneous estimation of states and unknown inputs for a class of Lipschitz nonlinear systems using only the measured outputs. The system is assumed to have bounded uncertainties that appear on both the state and output matrices. The observer design problem is formulated as a set of linear constraints which can be easily solved using linear matrix inequalities (LMI) technique. An application based on manipulator arm actuated by a direct current (DC) motor is presented to evaluate the performance of the proposed observer. estimate both state and faults.