A reduced order model (ROM) for addressing nonlinear aeroelasticity problem, including both structural and aerodynamic nonlinearities, has been developed. The CFD-based procedure captures the essence of an aerodynamic system while reducing its computational complexity. An Eigensystem Realization Algorithm is used to convert the ROM unsteady aerodynamics into the LTI state space model. A reduction in the cost of the realization of the ROM kernel is obtained by the identification of the state-space model. A micro-macro composite analysis that includes nonlinear strain rate effects and is capable of modeling in situ defects, such as cracks and delaminations, is used in the structural analysis of polymer matrix composite laminates. These nonlinearities are included in nonlinear time invariant structural ROMs which are identified for various cases of strain rates. Aeroelastic analysis is conducted using the nonlinear state space model. The state-space model is a highly optimized decoupled system while retaining significant details of the aeroelastic system. The approach used is computationally efficient and will be an essential element in damage detection and structural health monitoring (SHM) where multiple solutions of the "forward" problem is necessary in order to solve the inverse problem.