An accurate finite element (FE) model of a structure is essential for predicting reliably its dynamic characteristics. Such a model is used to predict the effects of structural modifications for dynamic design of the structure. These modifications may be imposed by design alterations for operating reasons. Most of the model updating techniques neglect damping and so these updated models can't be used for accurate prediction of vibration amplitudes. This paper deals with the basic formulation of damped finite element model updating method and its use for structural dynamic modifications. In this damped damped finite element model updating method, damping matrices are updated along with mass and stiffness matrices. The damping matrices are updated by updating the damping coefficients. A case involving actual measured data for the case of F-shaped test structure, which resembles the skeleton of a drilling machine is used to evaluate the effectiveness of damped FE model updating method for accurate prediction of the vibration levels and thus its use for structural dynamic modifications. It can be concluded from the study that damped updated FE model updating can be used for structural dynamic modifications with confidence.