Abstract: Parameter identification is currently one of the main research topics in the area of structural health monitoring. Stochastic subspace identification is a novel approach developed in recent years. It can identify modal parameters of linear structure from its ambient vibration. The key issue in stochastic subspace identification is to obtain the order of the system. Stabilization diagram is a novel approach to identify the order of the system, but it may yield false modes. An improved stabilization diagram is presented so that false modes can be distinguished and more precise identification results can be obtained. The improvement to stabilization diagram is to distinguish the false modes by using modal assurance criteria. At the same time, because the present damping theory does not accord to actual damping, the identified results are not satisfactory. Therefore, structural damping is eliminated or loosed in stabilization diagram, and more precise results are obtained. Improved stabilization diagram method is evaluated by numerical simulation on a three-span continuous beam.