There are many nonlinear systems used in engineering which require damage detection. For such systems, nonlinear damage detection methods may be useful. In this paper, a novel method is introduced that uses limit cycle oscillations that arise once the bifurcation (flutter) boundary is exceeded and shows greater sensitivity for damage detection versus linear damage detection techniques. Another advantage of this method is that it can be used for health monitoring of linear or nonlinear systems. Here a nonlinear aeroelastic panel is considered as a model to show the capabilities of the proposed damage detection technique. Also Proper Orthogonal Decomposition is used to find the number of independent damage locations in the panel.