•Structure is decomposed and condensed into substructures using CMS technique.•Multi-level updating is performed to narrow the damage dimension in each level.•The computational efforts are decreased while the identifiability increased.•Kalman filter is adopted to reconstruct the responses of suspicious substructure.•The effectiveness of the method was verified through simulation and laboratory test. Damage identification through finite element (FE) model updating usually forms an inverse problem. Solving the inverse identification problem for complex civil structures is very challenging since the dimension of potential damage parameters in a complex civil structure is often very large. Aside from enormous computation efforts needed in iterative updating, the ill-condition and non-global identifiability features of the inverse problem probably hinder the realization of model updating based damage identification for large civil structures. Following a divide-and-conquer strategy, a multi-level damage identification method is proposed in this paper. The entire structure is decomposed into several manageable substructures and each substructure is further condensed as a macro element using the component mode synthesis (CMS) technique. The damage identification is performed at two levels: the first is at macro element level to locate the potentially damaged region and the second is over the suspicious substructures to further locate as well as quantify the damage severity. In each level’s identification, the damage searching space over which model updating is performed is notably narrowed down, not only reducing the computation amount but also increasing the damage identifiability. Besides, the Kalman filter-based response reconstruction is performed at the second level to reconstruct the response of the suspicious substructure for exact damage quantification. Numerical studies and laboratory tests are both conducted on a simply supported overhanging steel beam for conceptual verification. The results demonstrate that the proposed multi-level damage identification via response reconstruction does improve the identification accuracy of damage localization and quantization considerably.