As an important component of Dynamic System, actuators are generally nonlinear and its output is immeasurable. It is a challenging problem for Fault Diagnosis (FD) when a partial LOE fault occurs in the actuator. Aiming at this problem, a novel nonlinear adaptive observer (NAO) is proposed to estimate the actuator output and diagnosis fault. Finally, the proposed FD scheme is applied in a high-fidelity Reaction Wheel (RW) in Satellite Attitude Control System (SACS), and a kind of partial Loss Of Effect (LOE) fault, named as augmentation of friction torque, is considered in our case study. The results of the case study demonstrate the effectiveness and superiority of our FD scheme.