An effective approach for updating finite element model is presented which can provide reliable estimates for structural updating parameters from identified operational modal data. On the basis of the dynamic perturbation method, an exact relationship between the perturbation of structural parameters such as stiffness change and the modal properties of the tested structure is developed. An iterative solution procedure is then provided to solve for the structural updating parameters that characterise the modifications of structural parameters at element level, giving optimised solutions in the least squares sense without requiring an optimisation method. A regularization algorithm based on the Tikhonov solution incorporating the generalised cross-validation method is employed to reduce the influence of measurement errors in vibration modal data and then to produce stable and reasonable solutions for the structural updating parameters. The Canton Tower benchmark problem established by the Hong Kong Polytechnic University is employed to demonstrate the effectiveness and applicability of the proposed model updating technique. The results from the benchmark problem studies show that the proposed technique can successfully adjust the reduced finite element model of the structure using only limited number of frequencies identified from the recorded ambient vibration measurements.