In this paper, problems related to the integrated design of observer based fault detection systems are addressed. In the context of norm based residual evaluation, a trade-off between false alarm rate (FAR) and fault detection rate (FDR) is first formulated. Aiming at minimizing FAR under given FDR, an approach is then presented for the design of observer based fault detection systems. For this purpose, the well-established factorization technique is applied. Finally, study is devoted to the comparison between the existing methods and the proposed one. (c) 2008 Elsevier Ltd. All rights reserved.