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This paper assesses the composite beam effects on the hysteretic behavior of fully-restrained beam-to-column connections as part of steel moment-resisting frames (MRFs) designed in highly seismic regions. A practical approach is developed based on available experimental data to simulate the hysteretic behavior of composite beams including the effects of assymetric deterioration of the beam flexural strength and stiffness. A system-level analytical study is then performed that evaluates the collapse resistance of steel frame buildings designed with steel MRFs including the composite beam effects. It is demonstrated that when steel MRFs are designed with a SCWB ratio larger than 1.5 a tolerable probability of collapse is achieved over the life cycle of the steel frame building. It is also shown that controlled panel zone yielding can be achieved while reducing the required number of welded doubler plates in beam-to-column panel zone joints.