The linear, time-invariant transfer function Txy has been utilized for the construction of FRF, based on the ambient vibration measurements. The results presented here indicated the possibility to identify and localize damages in steel railway bridges from the variations in the modal characteristics of the structure. The comparison between the modal characteristics for the healthy and collapsed bridge confirmed that damage had been existed. The abnormal percentage of change in modal damping, between the healthy and any other condition for a structure, can be regarded as a serious indicator for early stages of damage, while the high percentage of change in modal damping can clearly indicate the existence of damage in that structure. The average ratio of change in the damping ratio from the healthy to the collapsed bridge was about 206 % and this ration could be regarded as an index for the existence of a serious damage in steel bridges, which needs further evaluation in other test cases.