The importance of the performance of frequency regulation has already been acknowledged by regulators and Independent System Operators (ISOs). A performance-based frequency regulation market model considering both regulation capacity and regulation mileage constraints is proposed in this paper. In the proposed market, high-performance regulation resources have higher priorities to be selected in the market. Market clearing prices are derived with Lagrange relaxation. The analysis of the components of market clearing prices accurately indicates the correlation between regulation capacity and regulation mileage. To accommodate the proposed regulation market design, AGC allocation algorithm is adjusted based on the market clearing results. The clearing procedure of the market model is demonstrated on an illustrative case. The proposed market design is tested and verified with market simulations and system dynamic simulations. Simulation results are discussed and compared to show the effectiveness of the proposed market design. (C) 2016 Elsevier Ltd. All rights reserved.