Affordable quality housing is vital in developing countries to meet their growing population. Development of a new cost-effective system is crucial to fulfilling these demands. In view of this, a study is carried out to develop Expanded polystyrene (EPS), as a new affordable building system. Experimental investigation and finite element analysis to study the structural behavior of the EPS panel under axial load are undertaken. The panel consists of lightweight Structural panel consisting of an insulated polystyrene core sandwiched between two engineered layers of Galvanized Steel welded wire fabric mesh. To complete the panel from the process a Galvanised steel wire truss is pierced completely through the polystyrene core and welded to each of the outer layer sheets of Galvanized steel welded wire fabric mesh. The panels are loaded with axial load until failure. The ultimate load carrying capacity, load-lateral deflection profile, strain distributions, and the failure mode are recorded. Partial composite behaviors are observed in all specimens when the cracking load is achieved. Finite element analysis is also carried out to study the effect of slenderness ratio and shear connectors affect the strength and behavior of the panels. An empirical equation to predict the maximum load which is the major parameters that carrying capacity of the panels is proposed. The Eps panel system proposed in this research is able to achieve the intended strength for use in low rise building. The panel building system has tremendous flexibility–it can be used in place of wood or metal-framed walls, masonry block walls or precast panels. It is an excellent structural system that can be used in floors, ceilings, and roofs. The panel building system saves construction time while providing greater structural integrity. As an eco-friendly v alternative building system, panel components are manufactured with all recycled plastics and steel – no forest products are used. The panel building system is safe and friendly to humans and wildlife. Also by the use of expanded polystyrene, we can standardize the climatic conditions inside the building. The cost of the construction is also reducing by the usage of expanded polystyrene wall panels in the construction of building.