In this paper we studied a system fault detection and isolation in a networked Multi-UAVs formation flight set-up using a Cubature Kalman Filter (CKF). Both actuator and sensor faults of a UAV are considered as an agent node fault on the system of UAVs in the formation flight. The CKF based fault detection scheme developed is used in order to detect a system wide fault in the formation flight. Furthermore, the graph theoretic approach used for modeling the multi agent UAV's communication is exploited to isolate the faulty UAV (node) from the flight formation. A numerical simulation is presented to confirm the proposed fault detection and isolation (FDI) performance.