Due to the unique construction method of modular steel buildings (MSBs) with units prefabricated fully off the site and assembled quickly on the site, the inter-module connection for easy operation and overall performance of the system were key issues. However, it was a lack of relevant research on the system-level performance of MSBs. This study investigated the seismic performance of two-storey modular steel structure with a proposed vertical rotary inter-module connection. Three full-scale quasi-static tests, with and without corrugated steel plate and its combination, were carried out to evaluate and compare their seismic behaviour. The hysteretic performance, skeleton curves, ductile performance, stiffness degradation, energy dissipation capacity, and deformation pattern were clarified. The results showed that good ductility and plastic deformation ability of such modular steel structures. Two lateral-force resistance mechanisms with different layout combinations were also discussed in detail. The corrugated steel plate could significantly improve the lateral stiffness and bearing capacity of the modular steel structure. The cooperative working mechanism of modules and inter-module connections was further analyzed. When the lateral stiffness of upper and lower modular structures was close, limited bending moment transfer may be considered for the inter-module connection. While a large lateral stiffness difference existed initially between the upper and lower structures, an obvious gap occurred at the inter-module connection, and this gap may significantly influence the bending moments transferred by the inter-module connections. Meanwhile, several design recommendations of inter-module connections were also given for the application of MSBs.