This paper applies extended Kalman filter (EKF) for model-based fault detection of an electro-hydraulic system to deal with stochastic behaviour during control. Kalman filter (KF) is a powerful means of estimation, even when the precise nature of the modelled system is unknown. After a brief introduction of the KF and EKF, an EKF is chosen for this application. A mathematical model of an electro-hydraulic system is then developed. Some faults are introduced to evaluate the EKF fault detection method. Comparison of the EKF estimation accuracy and a linearised model-based accuracy shows the advantage of the EKF. The fault detection result shows that the EKF provides a good estimation of the system with stochastic performance for model-based fault detection and diagnosis.