The main purpose of the current work is to develop a new system for structural health monitoring of composite aerospace structures based on real-time dynamic measurements, in order to identify the structural state condition. Long-gauge Fibre Bragg Grating (FBG) optical sensors were used for monitoring the dynamic response of the composite structure. The algorithm that was developed for structural damage detection utilizes the collected dynamic response data, analyzes them in various ways and through an artificial neural network identifies the damage state and its location. Damage was simulated by slightly varying locally the mass of the structure (by adding a known mass) at different zones of the structure. Lumped masses in different locations upon the structure alter the eigen-frequencies in a way similar to actual damage. The structural dynamic behaviour has been numerically simulated and experimentally verified by means of modal testing on two different composite aerospace structures. Advanced digital signal processing techniques, e.g. the wavelet transform (WT), were used for the analysis of the dynamic response for feature extraction. WT's capability of separating the different frequency components in the time domain without loosing frequency information makes it a versatile tool for demanding signal processing applications. The use of WT is also suggested by the no-stationary nature of dynamic response signals and the opportunity of evaluating the temporal evolution of their frequency contents. Feature extraction is the first step of the procedure. The extracted features are effective indices of damage size and location. The classification step comprises of a feed-forward back propagation network, whose output determines the simulated damage location. Finally, dedicated training and validation activities were carried out by means of numerical simulations and experimental procedures. Experimental validation was performed initially on a flat stiffened panel, representing a section of a typical aeronautical structure, manufactured and tested in the lab and, as a second step, on a scaled up space oriented structure, which is a composite honeycomb plate, used as a deployment base for antenna arrays. An integrated FBG sensor network, based on the advantage of multiplexing, was mounted on both structures and different excitation positions and boundary conditions were used. The analysis of operational dynamic responses was employed to identify both the damage and its position. The system that was designed and tested initially on the thin composite panel, was successfully validated on the larger honeycomb structure. Numerical simulation of both structures was used as a support tool at all the steps of the work providing among others the location of the optical sensors used. The proposed work will be the base for the whole system qualification and validation on an antenna reflector in future work.