A decoupling approach for fault isolation in MIMO systems is presented in this letter. The fault isolation approach is based on a closed-loop concept, where the feedback controller is an integrated part of the set-up. The YJBK-parameterization (after Youla, Jabr, Bongiorno, and Kucera) for controllers is introduced. This allows the feedback controller to be modified by changing the YJBK matrix transfer function without changing the nominal feedback controller. Modification of the feedback controller via the YJBK transfer matrix causes the output residual response to be changed in the case of parametric faults and unchanged in the fault-free case. This facilitates fault detection. In the isolation case, the controller is modified in a way such that the residual response from the closed-loop system is independent of the modification for one specific parametric fault and else it depends on the parametric faults. This allows for any specific fault and eventually for all faults to be isolated.