The emergence of tougher environmental legislations and ever increasing demand for increased ride comfort, fuel efficiency, and low emissions have triggered exploration and advances towards more efficient vehicle gearbox technologies. The growing complexity and spatial distribution of such a mechatronic gearbox demands precise timing and coordination of the embedded electronics, integrated sensors and actuators as well as excellent overall reliability. The increased gearbox distributed systems have seen an increased dependence on sensors for feedback control, predominantly relying on hardware redundancy for faults diagnosis. However, the conventional hardware redundancy has disadvantages due to increased costs, weight, volume, power requirements and failure rates. This paper presents a virtual position sensor-based Fault Detection, Isolation and Accommodation (FDIA), which generates an analytical redundancy for comparison against the actual sensor output. The proposed FDIA scheme has been validated experimentally using an electro-hydraulic test rig and the gearshift simulation model, including the non-linear hydraulic actuator dynamics.