Conventional residual strength analysis of complex panels is founded on the principles of linear elastic fracture mechanics. Rigorous application of linear analysis techniques combined with failure criteria of ultimate stress capability and critical stress intensity factor results in the conclusion that there exist three potential panel failure modes: (1) skin failure, (2) stringer failures, and (3) fastener failure. Such analysis is in good agreement with test observations for cases involving limited damage. However, for cases where extensive damage exists in the skin element, one or two bay skin crack, linear elastic considerations can result in erroneous conclusions of failure mode and residual strength capability. Elasto-plastic finite-element analysis was conducted; this accounted for the plastic deformation capability of all elements. Crack configurations studied include unstiffened sheet, stringer stiffened sheet with all stringers intact and with center stringer broken. Effects of variations in material, stiffening ratio, and fastener flexibility on failure modes of stiffened panels were investigated. The results show that in all cases skin failure is always the critical failure mode.