This paper presents and assesses a new numerical framework for the nonlinear, inelastic analysis of two-dimensional (2D) vertical wood building systems that incorporate sheathed light-frame wood shear walls as seismic force-resisting system. The 2D building model is based on a sub-structuring approach that considers each floor diaphragm as a rigid body with three kinematic degrees-of-freedom (DOF). Each inter-storey shear wall assembly, including the floor diaphragms above and below, can then be simulated by a six-DOF sub-structure element with internal nonlinear DOF. The shear wall element takes into account deformations in the framing members, contact/ separation phenomena between framing members and diaphragms, anchoring equipment such as anchor bolts and hold-downs and all sheathing-to-framing connections. Corotational descriptions are used to solve for displacement fields that satisfy the equilibrium equations in the deformed configuration, accounting for geometric nonlinearity and P-Δ effects. To appraise the proposed numerical framework, the predictions of the numerical model are compared to experimental results from single and two-storey full-scale shear wall specimens. These examples demonstrate the capability of the numerical framework to simulate accurate load paths in the shear wall assemblies and successfully predict variations in strength, stiffness and energy dissipation characteristics of the seismic force-resisting system.