In this paper a new fault accommodation algorithm based on a two-level architecture is proposed for satellite formation missions. In this two-level framework, the notion of formation-level fault recovery (FLFR) is proposed, and the task of performance monitoring (PM) is defined in the high level (HL). By using the information provided by the PM module, the FLFR is capable of accommodating the "unhealthy satellite" that is partially recovered (due to the inexact and inaccurate estimation of the fault by the fault diagnosis and identification (FDI) modules) in the low-level fault recovery (LLFR), but is detected and labeled as "unhealthy" by the PM module. Consequently, fault is cooperatively recovered by our proposed architecture, and the specifications of formation mission are satisfied. Simulation results confirm the validity and effectiveness of our proposed algorithm.