An energy based damage index based on a new nonlinear Finite element (FE) approach applicable to RC structures subjected to cyclic, earthquake or monotonic loading is proposed. The proposed method is based on the evaluation of nonlinear local degradation of materials and taking into account of the pseudo-plastic hinge produced in the critical sections of the structure. A computer program is developed, considering local behavior of confined and unconfined concretes and steel elements and also global behavior and damage of reinforced concrete structures under cyclic loading. The segments located between the pseudoplastic hinges at critical sections and the inflection points are selected as base-models through simulation by the proposed FE method. The proposed damage index is based on an energy analysis method considering the primary half-cycles energy absorbed by the structure during loading. The total primary half-cycles absorbed energy to failure is used as normalizing factor. By using the proposed nonlinear analytical approach, the structure's force-displacement data are determined. The damage index is then calculated and is compared with the allowable value. This damage index is an efficient means for deciding whether to repair or demolish structures after an earthquake. It is also useful in the design of new structures as a design parameter for an acceptable limit of damage defined by building codes. The proposed approach and damage index are validated by results of tests carried out on reinforced concrete columns subjected to cyclic biaxial bending with axial force.