This paper presents a new methodology for coarse-grained atomistic simulation of inelastic material behavior including phase transformations in ceramics and dislocation mediated plasticity in metals.The methodology combines an atomistic formulation of balance equations and a modified finite element method.With significantly fewer degrees of freedom than those of a fully atomistic model and without additional constitutive rules but the interatomic force field,the new coarse-grained (CG) mothod is shown to be feasible in predicting the nonlinear constitutive responses of materials and also reproducing atomic-scale phenomena such as phase transformations (diamond → β-Sn) in silicon and dislocation nucleation and migration,formation of dislocation loops and stacking faults ribbons in single crystal nickel.Direct comparisons between CG and the corresponding full molecular dynamics (MD) simulations show that the present methodology is efficient and promising in modeling and simulation of inelastic material behavior without losing the essential atomistic features.The potential applications and the limitations of the CG method are also discussed.