This paper presents an effective method of FE model updating for health monitoring of structures by applying ambient vibration. And this method is experimented through damage detection and proved to be valid. Experiment about ambient vibration is performed on cantilever beam, and the dynamic characteristics are analyzed by NExT and ERA. The results of such experiments are compared to those of FE analysis, and this comparison enables us to overcome some errors in experiments and analysis. On the basis of improved results by the comparison, model updating is performed in order to construct a basic structure for health monitoring. For model updating, we employ direct matrix updating method (DMUM) and Error matrix method (EMM) in which ambient vibration is easily applied. The model updating by the methods are again evaluated in terms of error ratio of natural frequency, comparing each result before and after updating. Finally, we perform experiments on damage detection to verify the method of updating presented here, and evaluate its performance by eigen-parameter change method. The evaluation proves that the method of FE model updating using ambient vibration is effective for health monitoring of structure, and some further application of this method is suggested.