The author has been proposing a so-called "experimental micro-mechanics of composites" to bridge the gap between material fabrication and macroscopic mechanical properties. Based on in-situ observation using optical, scanning electron, and/ or scanning acoustic microscopes with loading devices, microscopic deformation and damage has been quantified. Moreover, theoretical models have been established for damage evolution. In real applications, however, since the strains applied to the composite structures are random and uncertain, the real-time strain monitoring is necessary to predict the present damage status in composites based on the above durability evaluation method. If the damage can be detected by using sensors, more reliable estimation of the damage status or the residual life can be made. In Japan, a new university-industry collaboration project on smart material/structure system supported by MITI has started, where the structural health monitoring is one of the major themes. The author acts as a group leader in the health monitoring group, which is currently studying the following items: (1) development of high-performance sensor system technology, (2) development of self-diagnosis and damage suppression systems for structural integrity, and (3) development of implementation technology for model smart structures. Some details are also presented for this project.