To explain the failure mechanism of a retaining wall in an earthquake and put forward effective aseismic measures based on energy theory, and taken from the upper bound theorem as a measure, the safety of anchor system is defined, and then the mechanism of input and dissipation of seismic energy is studied. Furthermore, by analyzing the wave characteristics of a destructive earthquake, an aseismic design of a retaining wall is proposed according to the flexible retaining theory. At last, an example is given and the result shows that the seismic behavior of a common rigid retaining wall is poor and the structure fails quickly under large seismic force with specific direction. On the contrary, the new system with an EPS damping layer can dissipate seismic energy well.