Timber poles are widely used in electricity transmission and telecommunication sectors throughout the world. The stress wave propagation for the condition assessment of timber poles is identified as a promising non-destructive testing (NDT) technique due to its simplicity and cost-effectiveness compared to other traditional methods. In this paper, a novel damage severity evaluation criterion for timber poles is proposed on the basis of short-time wavelet entropy of the reflected stress waves. The stress waves are generated by transverse impacts close to the ground level of the pole. The reflected stress waves are recorded and processed in the time frequency domain using the discrete wavelet transform. The decomposed signal components using discrete wavelet analysis are used to determine the wavelet entropy. The wavelet entropies of intact and damaged poles are compared to obtain the relative wavelet entropy (RWE) for damage severity estimation. Further, a numerical model for an in situ pole system is developed to simulate the transverse stress wave propagation and to evaluate the capability of the proposed defect severity estimation method. The developed numerical model is validated with experimental data from controlled testing and the data from field tests. The validated numerical model is then used to simulate different defect scenarios. The wavelet entropy is sensitive to the damage severity in timber poles and can be used as an effective tool to evaluate the severity of damages.