Based on strain signals, a new time-domain methodology for detecting the beam local damage has been developed. The pseudo strain energy density (PSED) is defined and used to build two major damage indexes, the average pseudo strain energy density (APSED) and the average pseudo strain energy density rate (APSEDR). Probability and mathematical statistics are utilized to derive a standardized damage index. Furthermore, by applying the analytic relation between the strain energy release rate and the stress intensity factor, an analytic solution of crack depth is derived. For the dynamic strain signals, the wavelet packet transform is used to pre-process measured data. Finally, a numerical simulation indicates that this method can effectively identify the damage location and its absolute severity.