In this paper, a new design approach is proposed for active Fault-Tolerant Control Systems (FTCS), which allows one to explicitly incorporate possible graceful performance degradation into the design process. The method is based on explicit model-following and reference input adjustment techniques. The performance degradation is represented through a reference model. Only actuator faults are considered herein. When a fault is detected by the Fault Detection and Diagnosis (FDD) algorithm, the reconfigurable controller will be designed automatically so that the dynamics of the closed-loop system match that of the reference model. The system command input is also adjusted on-line to prevent the actuators from saturating during the initial period of controller reconfiguration. An eigenstructure assignment technique has been used for designing feedback part of the reconfigurable controller. The proposed method has been evaluated using lateral dynamics of an F-8 aircraft subject to actuator failures and constraints on the actuator dynamic ranges. Satisfactory results have been obtained.