A sensitive damage detection method is proposed in this paper, which is based on analyzing ultrasonic guided waves signal using Lyapunov exponents of Duffing equation. The feasibility of the method is verified by indetifying Guided wave signal in a steel pipe. Firstly, the Duffing Inspection System and the inspection principle are explained. The determination of system parameters is described in detail. Secondly, the propagation of guided wave in 3m-in-length steel pipe is measured experimentally, and the measured signals are analyzed by the Duffing Inspection System. The experimental results show that the Lyapunov exponents of Duffing Inspection System can effectively identify small defect echo and has strong immunity to the noise simultaneously. In addition, a damage index is defined by the ratio of the Lyapunov Exponent when inputting measured guided wave signal with noise to the one when only inputting measured noised signal. It can help us evaluate the damage level of defect. This method is significant for improving the sensitivity of small defects detection using ultrasonic guided wave.