A new distributed structural damage detection approach based on a two-stage Kalman estimator approach, which is not available in the previous literature, is proposed for the identification of large size structural parameters under limited input and output measurements. A large size structure is decomposed into small size substructures based on its finite element formulation and each substructure is identified by utilizing the two-stage Kalman estimator approach. It can greatly reduce the time of iteration calculation. Numerical example of identifying the parameters of a large-size plane truss bridge is conducted. Simulation results show that the proposed approach is able to identify structural systems.