The objective of this study is to investigate the effects of dam–reservoir interaction (DRI) on the nonlinear seismic response of earth dams. Although DRI effects have for long been considered as insignificant for earth dams, that conclusion was mainly based on linear elastic investigations which focused only on the acceleration response of the crest without examining the seismic shear stresses and strains within the dam body. The present study explores further the impact of DRI focusing on the nonlinear behavior of earth dams. The effects of reservoir hydrodynamic pressures are investigated in terms of both seismic dam accelerations and nonlinear dynamic soil behavior (seismic shear stresses and strains). It is shown that although dam crest accelerations are indeed insensitive to DRI, the stress and strain development within the dam body can be significantly underestimated if DRI is ignored.