||For performance evaluation of structural systems under seismic loads, accurate modeling of structural component and system response behavior in the nonlinear range is required. In this study, the differential-equation-based hysteresis (Bouc-Wen) model is incorporated into ABAQUS to describe the inelastic connection behaviors of moment frames, taking into account capacity uncertainties of connections documented in the FEMA/SAC projects. A three-dimensional (3D) finite-element model is developed to examine the effects of bi-axial motions including those due to torsion oscillation. Effects of gravity frames, panel zones, and inelastic column deformation are also considered. Numerical examples are carried out to evaluate displacement demand. System capacity against incipient collapse is determined by the incremental dynamic analysis (IDA). Both inherent variability and modeling error are considered. Results indicate that torsional effects due to asymmetric member failures are important. The conventional lumped-plasticity model limits the development of plasticity of columns, thus is not appropriate in IDA for system capacity analysis. As expected, fracture failures of the pre-Northridge connections have a severe impact on the building performance. The methods of modeling and response analysis developed will be used in the reliability and redundancy study in the companion paper.