An approach based on a displacement compatibility model is presented for both riveted and bonded stiffened composite panels containing impact damage. This represents the first application of the displacement compatibility model to the failure analysis of impacted stiffened composite panels, and some newresults are obtained for the impact damage tolerance properties of stiffened composite panels. In the present analysis, the previous displacement compatibility model for a stringer/orthotropic skin panel is improved for a stringer/unbalanced skin panel. The impact damage is simplified as an elliptic hole based on the compressive failure mechanisms of impacted composite laminates and stiffened panels. Predictions for failure loads and damage arrest capability agree well with experimental results for several composite panel configurations. The important results obtained in this study are: (1) damage arrest capability is dominated by the strength of the skin/stringer attachment; (2) distinct two-stage failure shows that the riveted panels have significant damage arrest capability due to the high shear strength of the rivets; and (3) since the very low shear strength of the skin/stringer attachment, the co-cured panels have no damage arrest capability.