Spatially dense vibration measurement can be obtained by use of a continuously scanning laser Doppler vibrometer (CSLDV) system that sweeps its laser spot along a scan path. For a linear, time-invariant, viscously damped structure undergoing free vibration, a type of vibration shapes called free response shapes was defined and obtained by the authors using a CSLDV system with the demodulation method. To date, application of free response shapes is limited to structural damage identification, and they cannot be directly used for model validation while mode shapes can be. This paper extends the concept of free response shapes by proposing a new modal parameter estimation (MPE) method using a CSLDV system to estimate modal parameters of the structure undergoing free vibration, including natural frequencies, modal damping ratios, and mode shapes; the MPE method is applicable to linear structures without repeated and closely spaced modes. Advantages of the proposed method are: (1) modal damping ratios and mode shapes can be accurately estimated from obtained free response shapes in the least-square sense, (2) the scanning frequency of the CSLDV system can be relatively low, and (3) estimated mode shapes can be used for structural damage identification as if they were measured by stepped scanning of a scanning laser Doppler vibrometer. A baseline-free method is applied to identify structural damage using mode shapes estimated by the proposed MPE method. The method does not require any baseline information of an undamaged structure, such as its complete geometry, material properties, boundary conditions, modal parameters, and operating deflection shapes. In the proposed MPE method, natural frequencies of the structure are identified from free response of certain fixed points on the structure; its modal damping ratios and mode shapes are simultaneously estimated using free response shapes measured by a CSLDV system. Both numerical and experimental investigations are conducted to study the MPE method and its application to baseline-free damage identification with mode shapes estimated by the MPE method.