The recent trend in the building industry of Turkey as well as in many European countries is towards utilizing the tunnel form (shear-wall dominant) construction system for development of multi-story residential units. The tunnel form buildings diverge from other conventional reinforced concrete (RC) buildings due to the lack of beams and columns in their structural integrity. The vertical load-carrying members of these buildings are the structural-walls only, and the floor system is a flat plate. Besides the constructive advantages, tunnel form buildings provide superior seismic performance compared to conventional RC frame and dual systems as observed during the recent devastating earthquakes in Turkey (1999 Mw 7.4 Kocaeli, Mw 7.2 Duzce, and 2004 Mw 6.5 Bingol). With its proven earthquake performance, the tunnel form system is becoming the primary construction technique in many seismically active regions. In this study, a series of nonlinear analyses were conducted using finite element (FE) models to augment our understanding on their failure mechanism under lateral forces. In order to represent the nonlinear behavior adequately, The FE models were verified with the results of experimental studies performed on three dimensional (3D) scaled tunnel form building specimens. The results of this study indicate that the structural walls of tunnel form buildings may exhibit brittle flexural failure under lateral loading, if they are not properly reinforced. The global tension/compression couple triggers this failure mechanism by creating pure axial tension in the outermost shear-walls.