The effects of soil-structure interaction on the seismic response of a simple yielding system representative of code-designed buildings are investigated. The design concepts developed earlier for fixed-base systems are extended to take the foundation flexibility into account. This is done by use of a non-linear replacement oscillator recently proposed by the authors, which is characterized by an effective ductility along with the known effective period and damping of the system for the elastic condition. Numerical results are computed for interaction conditions prevailing in Mexico City, the interpretation of which shows the relative importance of the elastic and inelastic interaction effects. Strength reduction factors relating elastic to inelastic response spectra are also examined. To account for their behavior in a design context, a site-dependent reduction rule proposed elsewhere for fixed-base systems is suitably adjusted for interacting systems, using the solution for the non-linear replacement oscillator. Finally, a brief explanation is given of the application of this information in the formulation of the new interaction provisions in the Mexico City building code.