In the seismic analysis and design of the underground structure, the response displacement method, as a pseudostatic method, has been widely adopted for its solid theoretical background, clear physical concept, and ease of implementation. The subgrade modulus is an essential parameter to the response displacement method, and a few approaches are available to determine its value. However, the existing methods neglect the interaction between the radial and tangential subgrade modulus and the influence of actual ground deformation, resulting in an inaccurate estimation. This study presents a solution to overcome these defects for the response displacement method adopted in the transverse seismic analysis of the shield tunnel with a circular cross section. First, the analytical solutions of subgrade modulus for ground deformation modes described by the Fourier series are derived based on the theory of elasticity. The ratio of the radial displacement to tangential displacement is introduced to create a link between the radial and tangential subgrade modulus. Based on the solutions of subgrade modulus for different ground deformation modes, the displacement fitting method is proposed to derive the subgrade modulus corresponding to the actual ground deformation. With this method, the subgrade modulus would adjust according to the ground displacement. Finally, a case study is conducted to illustrate the validity of the displacement fitting method.