The rapid population growth and urbanization have made a massive demand for the shelter and construction materials. Masonry walls are the major component in the housing sector and it has brittle characteristics and exhibit poor performance against the uncertain loads. Further, the structure requires heavier sections for carrying the dead weight of masonry walls. The present investigations are carried out to develop a simple, lightweight and cost effective technology for replacing the existing wall systems. The lightweight concrete is developed for the construction of cement wall panel. The EPS (Expanded Polystyrene) beads of 3 mm diameter size are mixed with concrete and developed a lightweight concrete with a density 9 kN/m3. The lightweight sandwich panel is cast with a lightweight concrete inner core and ferrocement outer skins. This lightweight wall panel is tested for in-plane compression loading. A nonlinear finite element analysis with damaged plasticity model is carried out with both material and geometrical nonlinearities. The experimental and analytical results were compared. The finite element study predicted the ultimate load carrying capacity of the sandwich panel with reasonable accuracy. The present study showed that the lightweight concrete is well suitable for the lightweight sandwich wall panels.