•Establish a numerical model for typical piloti-type building structures with vertical irregularities in Korea.•Show the inadequacy of existing limit states through correlation analysis between IDR and concrete strain.•Propose strain-based limit states for piloti-type structures to exhibit local damage due to vertical irregularity.•Develop new IDR-based limit states having damage probabilities equivalent to the strain-based limit states.•Verify the developed limit states with observed damage data by introducing a damage probability measure. Limit states have been widely used as a threshold for classifying and evaluating building damage states either analytically or empirically, and current guidelines or codes generally provide the limit state as interstory drift ratio (IDR) for a single lateral-load resisting system. However, piloti-type structures in Korea have a vertically irregular system consisting of a moment frame for parking lots at the first story and a shear wall system for residential space at upper stories, making it difficult to evaluate the damage states against earthquakes using existing limit states. In this regard, new limit states for the typical piloti-type building structures were developed to evaluate the damage states probabilistically via seismic fragility assessments and verified with observed damage data using a damage probability estimator (DPE). The DPE was introduced as a probabilistic damage measure available from both analytical and empirical ways. First, a prototype model for the typical piloti-type structures damaged during the 2017 Pohang earthquake was proposed to simulate seismic demands in terms of both IDR and concrete strain. Second, strain-based limit states were examined and determined to use as an alternative to the existing IDR-based limit states. Finally, the new IDR-based limit states were developed on the basis of correlation between IDR and concrete strain to reflect local damage under vertical irregularity. The results revealed that the new IDR-based limit states were determined as approximately 30% reduction from the existing IDR-based limit states and the feasibility of the new limit states was validated with the observed damage data obtained from the 2017 Pohang earthquake. The seismic fragility function updated based on the new limit state could estimate more reliable damage states of the piloti-type residential buildings.