This paper presents a Modified Tikhonov Regularization (MTR) method in model updating for damage identification with model errors and measurement noise influences consideration. The identification equation based on sensitivity approach from the dynamic responses is ill-conditioned and is usually solved with regularization method. When the structural system contains model errors and measurement noise, the identified results from Tikhonov Regularization (TR) method often diverge after several iterations. In the MTR method, new side conditions with limits on the identification of physical parameters allow for the presence of model errors and ensure the physical meanings of the identified parameters. Chebyshev polynomial is applied to approximate the acceleration response for moderation of measurement noise. The identified physical parameter can converge to a relative correct direction. A three-dimensional unsymmetrical frame structure with different scenarios is studied to illustrate the proposed method. Results revealed show that the proposed method has superior performance than TR Method when there are both model errors and measurement noise in the structure system.