A number of structural health monitoring strategies have been proposed recently that can be implemented in smart sensor networks. Many are based on changes in the experimentally determined flexibility matrix for the structure under consideration. However, the flexibility matrix contains only static information; much richer information is potentially available by considering the dynamic flexibility, or receptance, of the structure. Recently, the stochastic dynamic DLV method was proposed based on the changes in the dynamic flexibility matrix employing centrally collected output-only measurements. This paper extends the stochastic dynamic DLV method so that it can be implemented on a decentralized network of smart sensors. New damage indices are derived that provide robustness estimates of damage location. The smart sensor network is emulated with wired sensors to demonstrate the potential of the proposed method. The efficacy of the proposed approach is demonstrated experimentally using a model truss structure.