Underactuated autonomous underwater vehicles (AUVs) frequently suffer from motion instability caused by thruster failures and environmental disturbances, including ocean currents and waves, which significantly degrade trajectory tracking performance. To address these challenges, this study develops a robust backstepping control scheme incorporating an adaptive error observer to enhance motion stability under adverse conditions. A simplified horizontal-plane dynamic model is first established to facilitate controller synthesis. An advanced disturbance observer is then designed to estimate and compensate for uncertainties arising from both thruster malfunctions and external perturbations. The proposed nonlinear controller, derived via backstepping methodology, is systematically integrated with the AUV dynamics. Lyapunov-based stability analysis rigorously proves the global asymptotic convergence of the closed-loop system. Extensive numerical simulations demonstrate the controller’s exceptional robustness against simultaneous thruster faults and environmental disturbances, exhibiting superior disturbance rejection capabilities compared to conventional approaches. The results conclusively validate the proposed method’s effectiveness in maintaining precise trajectory tracking and operational reliability for underactuated AUVs operating in complex marine environments with multiple uncertainties.