This paper proposes a Structural Health Monitoring (SHM) approach to detect localized damage by employing a Multi-Label Radial Basis Function Neural Network (ML-RBFNN). The proposed research methodology aims to identify structural damage more efficiently. This involves dividing the main structure into smaller sub-structures known as zones instead of employing a global search for damage across the entire structure. Each zone is further divided into smaller groups, including sub-zones, nodes, or elements. To reduce the complexities associated with feature extraction, auto-regressive (AR) model parameters extracted from raw time series are considered damage-sensitive features. Considering the simultaneous effects of multiple sensors can increase the number of inputs to the networks, making it challenging to reduce the complexity of the dataset. To address this problem, the principal component analysis (PCA) method is utilized to decrease the dimension of feature space. The effectiveness of the proposed approach is evaluated through a comprehensive comparative analysis against conventional single-stage damage detection methods, with a focus on computational costs and accuracy. Furthermore, the noise-sensitivity characteristics of the proposed method are explored, providing insights into their robustness under various conditions. The validation of the approach is carried out through numerical modeling using the ASCE benchmark structure and experimental data collected from the Qatar University Grandstand Simulator. The application of ML-RBFNN with AR parameters as features yielded a remarkable accuracy exceeding 98% in diagnosing damage occurrence and location for both multi-stage and single-stage SHM methods. Moreover, our proposed approach demonstrates enhanced computational efficiency compared to the single-stage method.