A nonlinear adaptive observer was proposed for a class of Lipschitz nonlinear systems with unknown parameters and output uncertainty.Under the condition that the output uncertainty is Lipschitz,the structure of the observer was given.The observer gain matrix and the adaptive law of parameter estimation were selected based on calculation of Riccati equation and linear matrix inequality (LMI).The uniform boundedness of the estimation error of the system state was shown by Lyapunov method.The simulation results demonstrated the effectiveness of the proposed adaptive observer.