Helicopter rotor system operates in a highly dynamic and unsteady aerodynamic environment leading to severe vibratory loads on the rotor system. Repeated exposure to these severe loading conditions can induce damage in the composite rotor blade which may lead to a catastrophic failure. Therefore, an interest in the structural health monitoring (SHM) of the composite rotor blades has grown markedly in recent years. Two important issues are addressed in this thesis; (1) structural modeling and aeroelastic analysis of the damaged rotor blade and (2) development of a model based rotor health monitoring system. The effect of matrix cracking, the first failure mode in composites, is studied in detail for a circular section beam, box-beam and two-cell airfoil section beam. Later, the effects of further progressive damages such as debonding/delamination and fiber breakage are considered for a two-cell airfoil section beam representing a stiff-inplane helicopter rotor blade. It is found that the stiffness decreases rapidly in the initial phase of matrix cracking but becomes almost constant later as matrix crack saturation is reached. Due to matrix cracking, the bending and torsion stiffness losses at the point of matrix crack saturation are about 6-12 percent and about 25-30 percent, respectively. Due to debonding/delamination, the bending and torsion stiffness losses are about 6-8 percent and about 40-45 percent after matrix crack saturation, respectively. The stiffness loss due to fiber breakage is very rapid and leads to the final failure of the blade. An aeroelastic analysis is performed for the damaged composite rotor in forward flight and the numerically simulated results are used to develop an online health monitoring system. For fault detection, the variations in rotating frequencies, tip bending and torsion response, blade root loads and strains along the blade due to damage are investigated. It is found that peak-to-peak values of blade response and loads provide a good global damage indicator and result in considerable data reduction. Also, the shear strain is a useful indicator to predict local damage. The structural health monitoring system is developed using the physics based models to detect and locate damage from simulated noisy rotor system data. A genetic fuzzy system (GFS) developed for solving the inverse problem of detecting damage from noise contaminated measurements by hybridizing the best features of fuzzy logic and genetic algorithms. Using the changes in structural measurements between the damaged and undamaged blade, a fuzzy system is generated and the rule-base and membership functions optimized by genetic algorithm. The GFS is demonstrated using frequency and mode shape based measurements for various beam type structures such as uniform cantilever beam, tapered beam and non-rotating helicopter blade. The GFS is further demonstrated for predicting the internal state of the composite structures using an example of a composite hollow circular beam with matrix cracking damage mode. Finally, the GFS is applied for online SHM of a rotor in forward flight. It is found that the GFS shows excellent robustness with noisy data, missing measurements and degrades gradually in the presence of faulty sensors/measurements. Furthermore, the GFS can be developed in an automated manner resulting in an optimal solution to the inverse problem of SHM. Finally, the stiffness degradation of the composite rotor blade is correlated to the life consumption of the rotor blade and issues related to damage prognosis are addressed.