Chapters 4, 5 and 10 have shown that the estimation of time variable parameters can help to model ‘non-stationary’ systems whose static and dynamic behaviour changes over time. On the other hand, if the changes in the parameters are functions of the state or input variables (i.e. the parameters and/or their changes actually constitute stochastic state variables), then the system is truly nonlinear and likely to exhibit severe nonlinear behaviour. Normally, this cannot be approximated in a simple TVP manner; in which case, recourse must be made to the alternative, and more powerful State-Dependent Parameter (SDP) modellingmethods that are the main topic of this chapter.