An ultrasonic guided wave based damage detection technique has been developed for structural health monitoring (SHM) of composite structures submerged in water. Specially designed guided wave transducers are utilized to selectively excite and receive guided waves with dominant shear horizontal particle displacements. It has been shown that the SH type waves are insensitive to water loading conditions. With appropriate water sealing, the transducers can be applied to composite structures submerged in water. The guided wave signals collected from an underwater composite structure are almost identical to the signals that are obtained before the structure is submerged. Experiments have been conducted to demonstrate the feasibility of damage detection in underwater composite structures. A thick carbon/epoxy composite beam is used as the test sample. Excellent damage detection results were obtained for both dry and underwater tests.