This paper demonstrates new methodological developments in 3-dimensional (3-D) nonlinear collapse simulations of steel buildings under earthquake shaking. In particular, a novel modeling approach is proposed, including a recently developed 3-D beam-column element with selective gradient-inelasticity. The proposed gradient-inelastic formulation ensures mesh-convergent results in the presence of a material law exhibiting softening. The formulation features a newly developed multiaxial constitutive relation with softening that allows for explicit consideration of both cyclic hardening typically observed in steel materials, and the cyclic strength and stiffness deterioration of beam-columns due to inelastic local buckling. The overall modeling approach is validated by both (a) member-level and (b) system-level collapse simulations. The former relies on comparisons with prior available tests on steel beam-columns with hollow square sections (HSS) and wide flange sections. System-level validations feature a full-scale four-story steel frame building that was tested through collapse on the E-Defense shake table in Japan. The 3-D simulation results with the proposed element formulation provide valuable insights into the fundamental mechanisms governing the structural response up to collapse and the primary differences with predictions from 2-D simulations.