Abstract Exponential damping is a new potential damping model for dynamic analysis of systems. This article outlines a complex mode procedure for identifying the exponential damping model and discusses its applicability and limitations. A new iterative method for relaxation factor is proposed, without using the full set of modal data, which is simple, direct, and compatible with conventional modal testing procedures. Combined with the frequency response functions (FRFs)‐based model updating method, the finite element model with such nonviscous damping is updated. The proposed method and several related issues are illustrated by numerical examples. It is shown that the finite element model updated method for the systems with exponential damping can predict accurately not only the natural frequencies but also the FRFs of the systems.