A new design approach based on the minimal order nonlinear observer is presented to detect and locate leaks in complicated pipelines, since the measurements of pressure and flow are realizable only at the two extremes of the ducts, the state decoupling technology is utilized in generating the residual values and an appropriate method of linear coordinate transformation is selected. Then the residual sets are attained according to a series of state equations, which are sensitive to the leak set. Finally the performance of the approach is demonstrated by using the experimental data taken from the airplane refueling pipelines with leaks, and satisfactory results are obtained.