This paper investigates the effect of the composite action on the seismic performance of steel special moment frames (SMFs) through collapse. A rational approach is first proposed to model the hysteretic behavior of fully restrained composite beam-to-column connections, with reduced beam sections. Using the proposed modeling recommendations, a system-level analytical study is performed on archetype steel buildings that utilize perimeter steel SMFs, with different heights, designed in the West-Coast of the USA. It is shown that in average, the composite action may enhance the seismic performance of steel SMFs. However, bottom story collapse mechanisms may be triggered leading to rapid deterioration of the global strength of steel SMFs. Because of composite action, excessive panel zone shear distortion is also observed in interior joints of steel SMFs designed with strong-column/weak-beam ratios larger than 1.0. It is demonstrated that when steel SMFs are designed with strong-column/weak-beam ratios larger than 1.5, (i) bottom story collapse mechanisms are typically avoided; (ii) a tolerable probability of collapse is achieved in a return period of 50 years; and (iii) controlled panel zone yielding is achieved while reducing the required number of welded doubler plates in interior beam-to-column joints. Copyright © 2014 John Wiley & Sons, Ltd.