In this paper, a new fault accommodation framework that is based on a decentralized cooperative scheme is proposed for formation flying satellites. A low-level fault recovery (LLFR) module uses conventional estimation techniques to determine the severity of a fault. It then activates a recovery controller (RC) to accomplish the design specifications. Due to existence of a biased estimate of the fault, a high-level (HL) supervisor will detect any possible violations of the performance specifications, and consecutively activates the formation-level fault recovery (FLFR) module. This module compensates for performance degradations of the faulty satellite by requiring that the healthy satellites do allocate additional resources. Consequently, our proposed cooperative architecture recovers the fault while the decentralized control requirements and the error performance specifications are satisfied. Simulation results presented confirm the effectiveness of our proposed analytical work.