A decentralized damage detection method for shear structure based on substructure approach is proposed, which is promising for application in parallel and distributed damage detection systems. This method requires only three sensors to identify localized damage in any story of a building. A substructure method was used in this method to divide a complete structure into several substructures. Each substructure has a considerably smaller number of degrees of freedom (DOFs) which makes fewer requirements on the computing power of the data processing system. Moreover the damage detection process can be independently conducted on each substructure. Thus, this method is very attractive especially when smart sensors that have the embedded computing power are used. To better assess the performance of the method proposed above, experimental verification of the proposed approach has been conducted, which shows the proposed method works quite well.