Once local yielding occurs in the soil below a foundation, methods for estimating settlement based on theory of elasticity are not applicable. This paper presents a method based on finite element analyses for estimating the initial settlement of structures on clay when local yield occurs. Dimensionless curves are presented that can be used together with conventional elastic theory to estimate initial settlement at any load up to bearing capacity failure. Three parameters are required in the analysis: the elastic undrained Young's modulus, Eu; the ultimate bearing capacity, qu; and an initial shear stress ratio, f. Data from field loading tests indicate that the ratio Eu/su for normally consolidated inorganic sensitive clay is approximately equal to 1,000; Eu/su appears to decrease with increasing plasticity and increasing overconsolidation ratio. Some comments and recommendations are made concerning the evaluation of qu and f.