This paper investigates fault-tolerant control algorithm for diesel engine air path system with consideration of system parametric uncertainties, external disturbances and actuator faults. Initially, a finite-time disturbance observer is developed for estimating the synchronised uncertainties including parametric uncertainties and external disturbances. Based on the reconstructed information from the observer, a fault-tolerant control law is designed by using sliding mode control incorporated adaptive method. Furthermore, to attenuate the chattering problem caused by conventional sliding mode control method, the hyperbolic tangent function is utilised. A novel sliding variable is employed for improving the performance of the modified chattering-free control approach. The proposed fault-tolerant control algorithm is feasible for implementing and unnecessary caculations can be avoided, because the synchronised uncertainties and the actuator faults are tackled separately. Besides, the observer does not require the priori knowledge of the upper bounds of the synchronised uncertainties. Finally, simulation results and comparison are carried out and analysed for illustrating the effectiveness and validness of the proposed control schemes.