For the purpose of improving the lateral stability in the path following process for the distributed drive electric vehicles subject to multiple actuator/sensor faults, a new fault diagnosis and fault tolerant control method is proposed in this paper through the integration of the active front steering (AFS) and direct yaw-moment control (DYC). Firstly, considering the actuator/sensor faults and parameter uncertainties together, a Takagi–Sugeno fuzzy model is established to describe the integrated AFS/DYC system with nonlinear dynamics. Secondly, because the fault information plays a key role in the fault tolerant control, a fuzzy estimation observer is presented to diagnose actuator/sensor faults online. Thirdly, considering the high cost of the measurement sensors for lateral speed, it is hard to measure the complete state of the vehicle. Thus, in the frame of dynamic output feedback structure, a fuzzy fault tolerant control method is proposed to improve the path following performance and guarantee the dynamic stability. Finally, the hardware-in-the-loop experimental results of two typical driving maneuvers show that the proposed control method has a superior performance in the improvement of the driving stability and active safety.