A new structural health monitoring technique capable of in-service, on-line incipient damage detection has been proposed by the Center for Intelligent Material Systems and Structures, Physical changes in a structure cause changes in the mechanical impedance. Due to the electromechanical coupling in piezoelectric materials, this change causes a change in the electrical impedance of the piezoelectric sensor. Hence, by monitoring the electrical impedance and comparing this to a baseline measurement, we can determine when structural damage has either occurred or is imminent. However, in almost all practical health monitoring applications, the structure being monitored is constantly undergoing change due to the effect of external boundary conditions. One of the important factors that leads to this change is the temperature variations. In this paper, temperature effects on the electrical impedance of piezoelectric materials and the structures have been investigated. A computer algorithm was developed which incorporates temperature compensation into our health monitoring applications. Three experimental investigations were performed successfully under the temperature varying condition, in the range of 25 to 75°C, including a bolted pipe structure, composite reinforced aluminum and precision part such as gears. It was found that, by this compensation procedure, the impedance based health monitoring tehcnique is able to detect damage in the incipient stage, even with the presence of significant temperature variation.