The objective of this paper is to present an algorithm to locate and size damage in a beam structure. The method uses the changes in the modal strain energy distribution. A damage index, utilized to identify possible location and corresponding severity of local damage, is formulated and expressed in terms of modal displacements that can be obtained from mode shapes of the undamaged and the damaged structures. The possible damage locations in the structure arc determined by the application of damage indicator according to previously developed decision rules. The robustness and effectiveness of the method arc demonstrated using numerical examples of beam structures with simulated damage.