Abstract In this paper, an extended first order shear deformation theory is proposed for Reissner-Mindlin laminated composite panels with internal delamination. The distinctive feature of the present theory is that a contact mechanism is involved in the governing equations based on FSDT by introducing a constitutive relation between the contact force and the transverse deflection and are expressed in terms of the displacements and the rotation functions. The proposed theory is applied to investigate the structural failure of a delaminated Reissner-Mindlin composite panel subjected to in-plane compression. Numerical solutions are computed by developing MATLAB program for different values of thickness-to-width ratio, material properties, aspect ratio and delamination conditions and are compared with those obtained from the modified classic laminated plate theory established in previous works and with ABAQUS results. Both theories and ABAQUS analysis predict a consistent global buckling mode without opening in between the delamination. The comparisons of the two solutions not only validate the efficiency and accuracy of the proposed M-FSDT but also evidence that neglecting the transverse shear strain may lead to the overestimation of the load capacity of the panel up to more than 35% when the thickness-to-width ratio is greater than 0.15.