This study deals with the output-feedback asymptotic tracking control problem for a class of nonlinear strict-feedback systems with actuator loss of effectiveness failure. To handle with the output-feedback control issue in the presences of nonlinearities, a new reduced-order observer design is presented, by utilizing the dynamic gain technique, which not only eliminates the limitation that the Lipchitz coefficients are required to be known in the existing output-feedback results, but makes full use of the measurable information. Furthermore, a new failure compensation mechanism is proposed to erase the effect of actuator failure, by introducing a cubic absolute-value Lyapunov function method and a novel (σ,σf)-modification technique. Compared with the existing output-feedback failure compensation results, our proposed method can not only relax the assumption requirement on nonlinear function, i.e., the nonlinear function with respect to output y can be extended to the nonlinear one with respect to state variable χ¯i in the means of asymptotic tracking, but also avoid the issue that the estimate for actuator efficiency indicator drifts to a large value suddenly. Further, within the framework of backstepping design, a new high-gain reduced-order observer based adaptive output-feedback failure compensation control is developed. Then, with the aid of Lyapunov analysis method, it is shown that all the signals in the closed-loop system are globally bounded, and the system output can asymptotically track a given reference signal. Finally, a simulation example is given to illustrate the efficiency of the proposed techniques.