In this study, recently developed unscented Kalman filter (UKF) technique is studied for identification of nonlinear structural dynamic systems as an alternative to the extended Kalman filter (EKF). The EKF, which was originally developed as a state estimator for nonlinear systems, has been frequently employed for parameter identification by introducing the state vector augmented with the unknown parameters to be identified. However, the EKF has several drawbacks such as biased estimations and erroneous estimations especially for highly nonlinear dynamic systems due to its crude linearization scheme. To overcome the weak points of the EKF, the UKF was recently developed as a state estimator. Numerical simulation studies have been carried out on nonlinear SDOF system and nonlinear MDOF system. The results from a series of numerical simulations indicate that the UKF is superior to the EKF in the system identification of nonlinear dynamic systems especially highly nonlinear systems.