A system and method for detecting an erratic state of a monitored sensor includes generating a variation value for a monitored signal generated by a monitored sensor and a variation value for an estimated signal estimated based on a predictive signal generated by predictive sensor, where the predictive signal is predictive of the monitored signal. The monitored signal can rapidly fluctuate based on system operating conditions. A dynamic threshold value is generated based on the estimated variation value, and the monitored signal is compared with the dynamic threshold value to determine if the monitored signal is in an erratic state. The detection method is sufficiently sensitive to distinguish between rapid fluctuation of the monitored sensor and an erratic state.