In this paper a new integrated observer-based fault estimation and accommodation strategy for discrete-time piecewise linear (PWL) systems subject to actuator faults is proposed. A robust estimator is designed to simultaneously estimate the state of the system and the actuator fault. Then, the estimate of fault is used to compensate for the effect of the fault. By using the estimate of fault and the states, a fault tolerant controller using a PWL state feedback is designed. The observer-based fault-tolerant controller is obtained by the interconnection of the estimator and the state feedback controller. We show that separate design of the state feedback and the estimator results in the stability of the overall closed-loop system. In addition, the input-to-state stability (ISS) gain for the closed-loop system is obtained and a procedure for minimizing it is given. All of the design conditions are formulated in terms of linear matrix inequalities (LMI) which can be solved efficiently. Also, performance of the estimator and the state feedback controller are minimized by solving convex optimization problems. The efficiency of the method is demonstrated by means of a numerical example.