This paper presents a moving horizon estimation (MHE) method for discrete-time nonlinear systems decomposed into coupled subsystems with non-overlapping states. In the proposed algorithm, each subsystem solves a reduced-order MHE problem to estimate its own state based on the estimates computed by its neighbors. Conditions for the convergence of the estimates are investigated. The algorithm is applied to a model of three river reaches. (C) 2010 Elsevier Ltd. All rights reserved.