Subset selection and shrinkage methods locate and remove insignificant terms from identified models. The least absolute shrinkage and selection operator (Lasso) is a term selection method that shrinks some coefficients and sets others to zero. In this paper, the incorporation of constraints (such as Lasso) into the linear and/or nonlinear parts of a Separable Nonlinear Least Squares algorithm is addressed and its application to the identification of block-structured models is considered. As an example, this method is applied to a Hammerstein model consisting of a nonlinear static block, represented by a Tchebyshev polynomial, in series with a linear dynamic system, modeled by a bank of Laguerre filters. Simulations showed that the Lasso based method was able to identify the model structure correctly, or with mild over-modeling, even in the presence of significant output noise.