This paper investigates the problem of unknown input observer (UIO) design for Takagi–Sugeno (TS) fuzzy systems with time-varying delay. For observer design, all the unmeasured nonlinearities are isolated in the nonlinear consequent parts of TS fuzzy systems. This allows dealing with the well-known issue related to unmeasured premise variables for TS fuzzy observer design in a more effective fashion via the mean value theorem. Using the unknown input (UI) decoupling technique, no a priori information on the UI is needed for the proposed TS fuzzy observer design, which can guarantee the asymptotic estimations of both the system state and the unknown input. Employing a fuzzy Lyapunov–Krasovskii functional with a suitable augmented vector, the effect of time-varying delay on the estimation error dynamics is taken into account in the observer design. Numerical examples are presented to demonstrate the effectiveness of the proposed fuzzy UIO design method for nonlinear time-varying delay systems.