Fault detection in a Direct Current (DC) microgrid with multiple interconnections of distributed generation units (DGUs) is an interesting topic of research. The occurrence of any sensor fault in the DC microgrid should be detected immediately by the fault detection network to achieve an overall stable performance of the system. This work focuses on sensor fault diagnosis of voltage and current sensors in interconnected DGUs of the microgrid. Two separate higher order sliding mode observers (HOSM) based on model dynamics are designed to estimate the voltage and current and generate the residuals for detecting the faulty sensors in DGUs. Multiplicative single and multiple sensor faults are considered in voltage and current sensors. By appropriate selection of threshold, single and multiple sensor fault detection strategies are formulated. A hierarchical controller is designed to ensure equal sharing of current among the DGUs of the DC microgrid and stabilize the system. Simulations are performed to validate the proposed approach for various configurations of the DC microgrid under various load and off noise conditions.