Toward the reliable and safe operation of by-wire electric vehicles, an Active Fault-Tolerant Control (AFTC) strategy is developed in this paper. The developed controller revolves around a control allocation framework, extended here with Lyapunov-based stability constraints. Besides the ability to cope with actuator constraints and optimal actuator reconfiguration, the proposed allocation allows the graceful degradation of the tracking performance when actuator faults are present. Simulation results demonstrate that, in comparison with state-of-the-art control allocation schemes, the proposed approach significantly improves the controller’s tracking performance in the aftermath of actuator faults.