U-shaped dampers are efficient energy dissipation devices that have been widely used in various engineering applications. To improve the damping performance of U-shaped dampers in seismic isolation structures, a novel damping steel with superior mechanical properties was used to fabricate the dampers. The material properties, including yield strength, tensile strength, and elastic modulus, were determined. Five U-shaped dampers made of this novel damping steel were manufactured, and hysteretic performance tests were conducted. The test results indicate that under cyclic loading, the dampers exhibit stable hysteretic behavior and full hysteretic loops. Based on these findings, a finite element model of the U-shaped damper was developed to simulate its mechanical behavior under cyclic loading. The effects of plate thickness, plate width, plate spacing, and the length of the straight segment of the fillet on damper performance were then investigated. The parametric analysis results indicate that the U-shaped damper made of the novel damping steel possesses excellent mechanical properties and favorable hysteretic performance, providing a reference for the optimal design of such dampers.