The use of smart material and systems are gaining serious attention in the area of structural engineering due to their superior performance in real-world applications. The aforementioned technology requires real-time feedback in order to monitor them safely. This problem even gets into more complicated situation when it comes to adjust the current uncertainty of structures. To do this end, the realtime parameter estimation as well as state update (e.g. displacement and velocity) of an eight-storey frame type structure is considered. To deal with the early mentioned nonlinear problem due to multiple unknown variables a nonlinear observer is employed, namely, the unscented Kalman filter (UKF). As the parameter estimation along with the sate update are not that straight forward task due to the sensitivity of the initial covariance of the unknown parameters as well as for states uncertainties. The outcome shows that the proposed approach is capable of estimating the unknown parameters (e.g. damping matrix) quite efficiently with high accuracy. The investigated approach will facilitate the overall health monitoring of dynamical systems.