A finite element method for the dynamic analysis of concrete gravity dams is presented. Displacement based formulation is used for both fluid and structural domains. During severe ground motion, the impounding fluid in the reservoir may separate from the dam and cause forming of micro bubbles. As a result, the compressibility of water is reduced. This nonlinear phenomenon of the reservoir is termed cavitation. When the direction of the ground motion is changed, the micro bubble's region of fluid collapses, and an impact will occur. By using different damping ratios in the fluid and solid domains the spurious oscillations which were caused by the impact are removed. The cavitation is confined to the upper part of the reservoir, where it has an effect of paramount importance on the tensile stresses. To illustrate the cavitation effect, the response of the non-overflow monolith of the Pine Flat dam subjected to the first 6.5 s of the May 1940 El-Centro, California earthquake, is considered. In order that the cavitation phenomenon take place more widely, maximum acceleration was scaled to give an amplitude of 1 g. (C) 2001 Elsevier Science Ltd. All rights reserved.