- This work studies the problem of design of nonlinear observers in the presence of exogenous disturbances. In particular, the present work proposes a systematic design method for nonlinear state and disturbance observers in modular form, consisting of an observer for the disturbance-free part of the system, along with a disturbance observer and a state-estimate corrector. The modular observer is first defined and characterized in a general setting and then, a systematic design method is developed on the basis of exact linearization with eigenvalue assignment. Necessary and sufficient conditions for feasibility of the proposed nonlinear modular observer design are derived. The proposed modular nonlinear observer is tested through simulation studies in an illustrative example involving a biochemical reactor. 2008 Elsevier B.V. All rights reserved.