This paper proposes a nonlinear detection observer for the component fault detection and accommodation of nonlinear distributed processes. Specifically, the proposed results constitute an extension to previous work which utilized a linear observer for both detection and diagnosis of component faults for the same class of nonlinear distributed processes. An advantage of the proposed nonlinear observer is not simply the inclusion of nonlinear dynamics terms in the detection and diagnostic observers, but also the inclusion of such additional information in the expression for the dynamic residual threshold. Such an improved version of a dynamic threshold contributes to the robustness of the detection scheme and minimizes fault detection time. Finally, an adaptive diagnostic observer is proposed that is subsequently utilized in an automated control reconfiguration scheme that accommodates the component faults.