The lateral expansion Of concrete subjected to compression (i.e., the Poisson effect) is shown to be a significant factor influencing the behavior of rein-forced concrete elements in tension-compression states in which the principal tensile strain is relatively small. A method is presented by which concrete lateral expansion can be incorporated into a nonlinear finite element algorithm. The formulations presented presume the use of a secant-stiffness-based solution procedure, involving the concept of material prestrains. Material behavior models are described for nonlinear concrete expansion, strength reduction due to transverse cracking, strength enhancement due to confinement, and pre- and postultimate stress-strain response. The accuracy of the formulations are examined through finite element analyses of a number of shear panels and shear walls previously tested. It is shown that the inclusion of concrete lateral expansion can, in some cases, significantly alter the computed response of an element or structure. Further, it is shown that the consideration of expansion and confinement effects generally results in a significant improvement in the accuracy of the analysis.