This paper presents a performance-based methodology for the assessment of seismic vulnerability and capacity of buildings. The vulnerability assessment methodology is based on the HAZUS methodology and the improved capacity-demand-diagram method. The spectral displacement (Sd) of performance points on a capacity curve is used to estimate the damage level of a building. The relationship between Sa and peak ground acceleration (PGA) is established, and then a new vulnerability function is expressed in terms of PGA. Furthermore, the expected value of the seismic capacity index (SCev) is provided to estimate the seismic capacity of buildings based on the probability distribution of damage levels and the corresponding seismic capacity index. The results indicate that the proposed vulnerability methodology is able to assess seismic damage of a large number of building stock directly and quickly following an earthquake. The SC provides an effective index to measure the seismic capacity of buildings and illustrate the relationship between the seismic capacity of buildings and seismic action. The estimated result is compared with damage surveys of the cities of Dujiangyan and Jiangyou in the MS.0 Wenchuan earthquake, revealing that the methodology is acceptable for seismic risk assessment and decision making. The primary reasons for discrepancies between the estimated results and the damage surveys are discussed.