The goal of this paper is to describe an advanced method of a crack detecti
on: a new way to localize position and to estimate depth of a crack on rota
ting shaft. As a first step, the shaft is physically modelled with a finite
element method and the dynamic mathematical model is derived using the Ham
ilton principle; thus, the system is represented by various subsystems. The
equations of motion of the shaft with a crack are established by adapting
the local stiffness change through breathing and gaping from the crack to a
n undamaged shaft. This is the reference system for the given system. Based
on a model for transient behavior induced from vibration measured at the b
earings, a nonlinear state observer is designed to detect cracks on the sha
ft. This is the elementary NL-observer(Beo). Using the observer, an Estimat
or(Observer Bank) is established and arranged at the certain position on th
e shaft. When a crack position is localized, the procedure for estimating o
f the depth is engaged.