Pipeline networks have been the preferred mode of transportation for natural gas, oil, condensate, and water as they are the most economical, efficient, and safest mean to transport. Nevertheless, different types of damage such as abrasion, dent, and corrosion may develop over time, threatening the safety of the pipelines and result in significant costs. Pipeline leak detection systems can help detect and determine the location of the damage when there is a leak. Normally, small leaks are difficult to detect, therefore in this chapter a leak detection system based on nonlinear adaptive state observer is used to detect small changes of pressure and flow at both the inlet and outlet of the pipeline for the early identification of small leaks regardless of their location on the pipeline. The suggested model-based technique easily identifies the position of leakages in the pipe by assuming only flow and pressure measurements at the ends of each duct. In this approach, the fluid model can be represented as a set of coupled nonlinear dynamic equations in a leaking pipe. Our findings suggest that the proposed technique is a powerful and realistic tool to detect and determine the location of leaks in pipelines.