Most structures designed according to current code provisions will sustain residual deformations in the event of a design-level earthquake, even if they perform exactly as expected. Despite this reality, little consideration is currently given to residual deformations when assessing the seismic performance or in the design of seismic resistant structures. Parameters influencing residual deformations are first identified and a framework for evaluating performance based on a combination of maximum and residual response indices is proposed. Non-linear residual displacement spectra are computed for a number of SDOF hysteretic systems and design spectra, based on residual/maximum displacement ratios, are suggested as a function of effective secant period. Analyses are then extended to the response of MDOF systems through a series of non-linear time history analyses. The direct displacement based design method is then modified to include an explicit consideration of residual deformations in the early stages of the design procedure. A discussion on design decisions affecting residual deformations is also presented.