The Steer-By-Wire(SBW) system replaces complex mechanical linkages of the current steering system with electric motors, sensors, and electronic control units. However, the SBW system should guarantee its safety and reliability before commercialization, and therefore, a reliable and robust fault-tolerant technology has to be implemented. This paper proposes a fault-tolerant control algorithm for the SBW system. Based on careful analysis on propagation effects of sensor faults, a reliable fault-tolerant control strategy has been developed. The fault-tolerant controller consists of a fault detection part that monitors and detects faults in the steering wheel and road wheel sensors, and a reconfiguration part that switches to normal sensor signal based on fault detection information. It has been demonstrated by simulation that the proposed algorithm detects sensor faults accurately and enables reliable steering control under various dynamic fault situations.