Partially saturated soils associated with the presence of occluded air bubbles are commonly encountered in seismically active zones. Yet, there is a lack of deep understanding of the mechanisms of settlement that partially saturated soils suffer during seismic events. Consequently, a reliable seismic design approach for use in engineering practice is lacking. The aim of this paper is to show that seismically induced settlement of a level deposit of partially saturated soil can be estimated by summing the settlement related to excess pore pressure (EPP) generation/dissipation and increased soil mass compressibility in the presence of air bubbles, which are calculated separately. Predictions of the proposed effective stress-based methodology are found to be in good agreement with geotechnical centrifuge measurements. It is shown that the variation of degree of saturation is of significance. The proposed methodology utilizes the degree of saturation as a parameter and can satisfactorily predict the experimentally observed settlement.