Light-frame timber buildings are often stabilised against lateral loads by using diaphragm action of roofs, floors and walls. The mechanical behaviour of the sheathing-to-timber joints has a significant impact on the structural performance of shear walls. Most sheathing-to-framing joints show non-linear load-displacement characteristics with plastic behaviour. This paper is focused on the finite element modelling of shear walls. The purpose is to present a new connector shear element based on the theory of continuum plasticity. The incremental load-displacement relationship is derived based on the elastic-plastic stiffness tensor including the elastic stiffness tensor, the plastic modulus, a function representing the yield criterion and a hardening rule, and another function representing the plastic potential. The plastic properties are determined from experimental results obtained from testing actual connections. Load-displacement curves for shear walls are calculated using the connector shear model and they are compared with experimental and other computational results. Also, the ultimate horizontal loadcarrying capacity is compared to results obtained by an analytical plastic design method. Good agreements are found