Abstract: The research addresses the issue that conventional autoclaved lightweight concrete (ALC) wall panels are prone to cracking, detachment, and insufficient energy dissipation under seismic actions by proposing and investigating an ALC damping wall system with sliding and shear-friction energy dissipation capacity. A finite element model of reinforced concrete (RC) frame–ALC wall panel assemblies is developed in ABAQUS, and the mechanical performance of bare frames, frames with conventional ALC infill walls, and frames with ALC damping walls is comparatively analyzed. The results indicate that installing both ordinary ALC wall panels and damping walls can significantly enhance the stiffness and load-bearing capacity of the structure. Compared with the bare frame, the initial stiffness increases by 33.15% and 28.24%, and the peak load increases by 24.24% and 20.60%, respectively. Under conditions of comparable stiffness and load-bearing capacity, the peak displacement and ultimate displacement of the frame with ALC damping walls are 218.81% and 14.06% larger than those of the frame with ordinary ALC wall panels, respectively, which markedly improves the deformation capacity and seismic performance of the structure. On this basis, a construction method and corresponding quality control measures are proposed, centered on a 20 mm end deformation joint with flexible infill, a 5 mm thick M2.5 damping mortar sliding layer, and L-shaped clips for constrained connections. This provides a feasible new approach and theoretical basis for transforming ALC wall panels from traditional rigid infill components into energy-dissipating damping components.