The commonly used failure models of structural members have the following shortages: 1) Steel member’s damaged status under different plastic deformations cannot be precisely reflected; 2) The ultimate hysteresis energy dissipation capacity is underestimated; 3) Effect of nonpeak deformation on damage cannot be indicated. As a result, study of steel structure’s failure mechanism under strong dynamic loading is hindered. This paper proposed a modified two-parameter failure model based on deformation and energy dissipation of steel members. The proposed model developed a nonlinear failure model of deformation and energy dissipation derived from low cycle fatigue theory at small plastic strain and a linear failure model modified on the basis of Park-Ang damage model at large plastic strain. By combining these two stages, the model could describe the failure mechanism of steel members with respect to different degrees of plasticity. Low cycle fatigue experiments were conducted on a group of steel members to verify the model. The result shows that the model can well reflect the failure mechanism which combines the effects of first passage and accumulated dissipation energy. Thus it has significant theoretical and practical values in the study of working states and damage mechanism of engineering structures subjected to strong wind or earthquake.