A new health and usage monitoring methodology for detection and identification of damage in a helicopter rotor is presented. A full-scale rotor analysis in forward flight has been carried out using a detailed model of the coupled blade-fuselage behavior. Several rotor component faults, as well as local blade stiffness defects are considered. A set of Kalman filters is constructed, where the calculated blade tip response, in addition to elastic modes, comprises a state vector. In the proposed approach, each filter is based on the assumption that a particular fault has occurred. The best fitting model, according to measurements taken from the truth model, is determined in a probabilistic manner. In the numerical study used to demonstrate the performance of the method, two sets of noisy measurements are generated. The first set is based on blade tip sensors, and the second set consists of non-rotating hub loads. A Monte-Carlo analysis followed by a statistical experiment enables a comprehensive view of the statistical nature of the results. A parametric study is presented and conclusions concerning the detectability of damage in a helicopter rotor and the efficiency of the proposed method are drawn.