The problem of denoising damage indicator signals for improved operational health monitoring of systems is addressed by applying soft computing methods to design filters. Since measured data in operational settings is contaminated with noise and outliers, pattern recognition algorithms for fault detection and isolation can give false alarms. A direct approach to improving the fault detection and isolation is to remove noise and outliers from time series of measured data or damage indicators before performing fault detection and isolation. Many popular signal-processing approaches do not work well with damage indicator signals, which can contain sudden changes due to abrupt faults and non-Gaussian outliers. Signal-processing algorithms based on radial basis function (RBF) neural network and weighted recursive median (WRM) filters are explored for denoising simulated time series. The RBF neural network filter is developed using a K-means clustering algorithm and is much less computationally expensive to develop than feedforward neural networks trained using backpropagation. The nonlinear multimodal integer-programming problem of selecting optimal integer weights of the WRM filter is solved using genetic algorithm. Numerical results are obtained for helicopter rotor structural damage indicators based on simulated frequencies. Test signals consider low order polynomial growth of damage indicators with time to simulate gradual or incipient faults and step changes in the signal to simulate abrupt faults. Noise and outliers are added to the test signals. The WRM and RBF filters result in a noise reduction of 54–71 and 59–73% for the test signals considered in this study, respectively. Their performance is much better than the moving average FIR filter, which causes significant feature distortion and has poor outlier removal capabilities and shows the potential of soft computing methods for specific signal-processing applications.