This paper explores the possibility of using a combination of the empirical mode decomposition (EMD) and the Hilbert transform (HT), termed the Hilbert-Huang transform (HHT) method, to identify the modal damping ratios of the structure with closely spaced modal frequencies. The principle of the HHT method and the procedure of using the HHT method for modal damping ratio identification are briefly introduced first. The dynamic response of a two-degrees-of-freedom (2DOF) system under an impact load is then computed for a wide range of dynamic properties from well-separated modal frequencies to very closely spaced modal frequencies. The natural frequencies and modal damping ratios identified by the HHT method are compared with the theoretical values and those identified using the fast Fourier transform (FFT) method. The results show that the HHT method is superior to the FFT method in the identification of modal damping ratios of the structure with closely spaced modes of vibration. Finally, a 36-storey shear building with a 4-storey light appendage, having closely spaced modal frequencies and subjected to an ambient ground motion, is analyzed. The modal damping ratios identified by the HHT method in conjunction with the random decrement technique (RDT) are much better than those obtained by the FFT method. The HHT method performing in the frequency-time domain seems to be a promising tool for system identification of civil engineering structures.