This paper investigates the effect of transverse cracks on the S-0 mode velocity in GFRP and CFRP cross-ply laminates, and proposes a new AE source location method that considers the change in the S-0 mode velocity due to the transverse cracks. We found experimentally that the stiffness and the velocity decreased as the transverse crack density increased. Analytical predictions deduced from the combination of the complete parabolic shear-lag analysis, the classical plate theory and the laminated plate theory are in good agreement with the experimental results. Utilizing this relationship between the velocity and the mechanical damage, we located AE sources of transverse cracks in cross-ply laminates with the calculated in situ velocity. We were able to show that highly accurate source location requires the reduction of the in situ value of the velocity. The present method is simple but quantitative and useful in health-monitoring for detecting and localizing the damage in composite structures. (C) 2003 Kluwer Academic Publishers.