This paper explores the potential of integration of damage diagnostics based on built-in sensors with a progressive failure modeling for monitoring and prediction of composite structures, from damage initiation to final failure while they are in service. A piezobased structural health monitoring system was utilized to monitor the damage initiation based on acoustic signals and to detect its growth based on ultrasonic waves generated by the piezoelectric sensors. Utilizing a damage index and an imaging algorithm, damage initiation and damage extent were estimated, respectively. A finite element code (ABAQUS) based on a progressive failure analysis was adopted to simulate damage initiation and propagation in composites under a given loading condition. The numerical data and the diagnostic images were compared to x-ray pictures of a test coupon to verify the results. The results of the study strongly indicate that damage diagnostics and health prognostics could potentially be integrated to produce a powerful tool for managing the operation of composite structures in service.