This paper presents the stochastic elastic modulus reduction method for system reliability analysis of spatial variance frames based on the perturbation stochastic finite element method (PSFEM) and the local average of a random field. The stochastic responses and reliability index of each element of a structural frame are characterized by the PSFEM and the first-order second-moment method, to properly handle the correlation structures and scale of fluctuation of random fields. A strategy of elastic modulus adjustment for the estimation of system reliability is developed to determine the range and magnitude of elastic modulus reduction, by taking the element reliability index as a governing parameter. The collapse mechanism and system reliability index of a stochastic framed structure are determined through iterative computations of the PSFEM. Compared with the failure mode approaches in traditional system reliability analysis, the proposed method avoids two major difficulties, namely the identification of significant failure modes and estimation of the joint probability of failure modes. The influences of the correlation structure and scale of fluctuation of the random field upon system reliability are investigated to demonstrate the accuracy and computational efficiency of the proposed methodology in system reliability analysis of spatial variance frames.