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This paper studies the consensus problem for heterogeneous multi-agent systems with output saturations. We consider the agents to have different dynamics and assume that the agents are neutrally stable and that the communication graph is undirected. The goal of this paper is to achieve the consensus for leaderless and leader-following cases. To solve this problem, we propose the observer-based distributed consensus algorithms, which consists of three parts: the nonlinear observer, the reference generator, and the regulator. Then, we analyze the consensus based on the Lasalle’s Invariance Principle and the input-to-state stability. Finally, we provide numerical examples to demonstrate the validity of the proposed algorithms.