In this paper, a nonlinear analysis of three-dimensional steel frames is developed. This analysis accounts for material and geometric nonlinearities. The material nonlinearity considers the gradual yielding associated with member forces. The geometric nonlinearity includes the second-order effects associated with P-δ and P-Δ. The material nonlinearity at a section is considered using the concept of the P-M hinge consisting of many fibers. The geometric nonlinearity is considered by the use of stability functions. The modified incremental displacement method is used as the solution technique. The load-displacement relationships predicted by the proposed analysis compare well with those given by other approaches.