The magnitude of the economic losses sustained by communities subsequent to recent moderate and large earthquakes has prompted the need for seismic design philosophies and construction methods aimed at minimizing structural and nonstructural damage. In this project, the use of unbonded prestressing tendons as a connection mechanism in precast concrete construction is investigated for New Zealand materials and conditions. Vertically stacked precast wall units are post-tensioned together by means of prestressing strands, which are passed through vertical ducts inside the walls. As the walls are subjected to lateral displacements, gaps form at the base of the walls. The gaps reduce the system stiffness. As long as the prestressing strands are kept within the elastic limit, they can provide a restoring force which will return the walls to their initial position. Thus, the lateral force-displacement response may be idealised by a non-linear elastic relationship. The integrity of the walls is maintained as no plastic hinges form in the wall units and there are no residual post-earthquake deflections. Three half-scale precast wall units were tested individually in this study. Two specimens (Units 2 and 3) incorporated energy dissipation devices in the form of dogbone milled reinforcing bars cast into the foundation beam and grouted into the walls at the horizontal construction joints. In addition, gravity load effects were simulated in Unit 3 by means of external post-tensioning bars bolted to the strong-floor. The walls were subjected to drift (lateral displacement-to-height of actuator from wall base) levels reaching 4%. Damage was limited to concrete spalling at the ends of the walls. A linearly elastic response was effected in Unit 1 while a flag-shaped hysteresis response was observed in Units 2 and 3. The energy dissipators in Units 2 and 3 provided up to 14% equivalent viscous damping. The Public Good Science Fund of the New Zealand Foundation of Research, Science and Technology provided funding for this project under contract UOC 808.