In this paper, the class of bilinear systems subjected to unknown inputs for which there exists a disturbance decoupled observer with linear error dynamics is characterized. It is shown that the design of this kind of observer is equivalent to the design of a disturbance decoupled observer for a linear system. This result simplifies considerably the observer design compared to those proposed in the literature, and the observer existence conditions can be easily deduced. As a corollary of this result, necessary and sufficient conditions for the existence of disturbance decoupled linear observers for bilinear systems subjected to unknown inputs are derived. This approach is extended to the fault detection of bilinear systems.