Prompt diagnosis of faults associated with hydraulic actuators is important to maintain reliability and performance and to avoid complete loss of functionality. This paper presents new development and evaluation of a wavelet-based method, intended for on-line detection of internal leakage in a valve-controlled hydraulic actuator. This work is built upon the initial study by the authors, in which actuator's internal leakage was detected using limited-duration data on one of the actuator's chamber pressures, in response to a structured input signal and under no load condition. In the present work, the more realistic case of an actuator that is driven in a closed-loop mode to track pseudorandom position references is considered. Additionally, the actuator is subject to loading. Furthermore, limited-duration pressure signals are obtained using a sliding window technique applied to the stream of on-line measurements. It is shown that the root mean square values of level two detail coefficient vectors of pressure signals collectively establish a feature index that can effectively detect internal leakage. This monitoring index is shown to decrease in magnitude and energy once the leakage occurs. Extensive validation tests are performed to demonstrate the effectiveness of the proposed technique in detecting internal leakage, given any reference step input or loading condition. The significance of the proposed method is that it does not need models of the actuator and leakage fault or any baseline information on performance of the healthy actuator. Furthermore, the method remains effective even with control systems that are tolerant to leakage fault. Finally, the method can detect low internal leakages, in the range of 0.2 to 0.25 l/min, not reported in any of the previously published work. These aspects make the method very attractive from the industrial implementation viewpoint.