In this paper, we consider the design problem of an unknown-input observer for distributed network systems under the existence of communication delays. In the proposed method, each node estimates all states and calculates inputs from its own estimate. It is assumed that the controller of each node is given by an observer-based controller. When calculating each node, the input values of the other nodes cannot be utilized. Therefore, each node calculates alternative inputs instead of the unknown inputs of the other nodes. The alternative inputs are generated by own estimate based on the feedback controller of the other nodes given by the assumption. Each node utilizes these values instead of the unknown inputs when calculating the estimation and delay compensation. The stability of the estimation error of the proposed observer is proven by a Lyapunov-Krasovskii functional. The stability condition is given by a linear matrix inequality (LMI). Finally, the result of a numerical simulation is shown to verify the effectiveness of the proposed method.