An enhanced beam element is proposed for the nonlinear dynamic analysis of skeletal structures. The formulation extends the displacement based elastic Timoshenko beam element. Shear-locking effects are eliminated using exact shape functions. A variant of the Bouc-Wen model is implemented to incorporate plasticity due to combined axial, shear and bending deformation components. Interaction is introduced through the implementation of yield functions, expressed in the stress resultant space. Three additional hysteretic degrees of freedom are introduced to account for the hysteretic part of the deformation components. Numerical results are presented that demonstrate the advantages of the proposed element in simulating cyclic phenomena, in which shear deformations are significant.