Narrative:

While descending to an assigned altitude of 4000 ft, I looked up from my PNF duties in time to see our altitude go below 4000 ft during the autoplt altitude capture. The PF disengaged autoplt and assumed manual control to level the aircraft at 4000 ft. Maximum altitude deviation was 150 ft below assigned. I think what happened was that the PF was trying to reduce the rate of descent prior to reaching 4000 ft, to prevent a TCASII activation from some 2500 ft traffic just called out to us from ATC. Due to a weakness in our flight control computer, any pitch input that occurs at or after an altitude capture begins will mess up the original capture. I believe it starts a new capture process of the originally selected altitude that lags behind enough to cause an overshoot/deviation. It's easy to input a change of descent rate just as the flight director begins a capture. The way (for now) to avoid problems would be to make all adjustments to descent/climb rate prior to last 1000 ft of climb/descent, and then leave it alone.

Related reports:

Google
 

Original NASA ASRS Text

Title: CAPT OF AN MDT FAILED TO LEVEL OFF AT ASSIGNED APCH ALT DUE TO A LATE ATTEMPT TO MANUALLY OVERRIDE THE ALT CAPTURE FEATURE OF THE FMC AUTOPLT.

Narrative: WHILE DSNDING TO AN ASSIGNED ALT OF 4000 FT, I LOOKED UP FROM MY PNF DUTIES IN TIME TO SEE OUR ALT GO BELOW 4000 FT DURING THE AUTOPLT ALT CAPTURE. THE PF DISENGAGED AUTOPLT AND ASSUMED MANUAL CTL TO LEVEL THE ACFT AT 4000 FT. MAX ALTDEV WAS 150 FT BELOW ASSIGNED. I THINK WHAT HAPPENED WAS THAT THE PF WAS TRYING TO REDUCE THE RATE OF DSCNT PRIOR TO REACHING 4000 FT, TO PREVENT A TCASII ACTIVATION FROM SOME 2500 FT TFC JUST CALLED OUT TO US FROM ATC. DUE TO A WEAKNESS IN OUR FLT CTL COMPUTER, ANY PITCH INPUT THAT OCCURS AT OR AFTER AN ALT CAPTURE BEGINS WILL MESS UP THE ORIGINAL CAPTURE. I BELIEVE IT STARTS A NEW CAPTURE PROCESS OF THE ORIGINALLY SELECTED ALT THAT LAGS BEHIND ENOUGH TO CAUSE AN OVERSHOOT/DEV. IT'S EASY TO INPUT A CHANGE OF DSCNT RATE JUST AS THE FLT DIRECTOR BEGINS A CAPTURE. THE WAY (FOR NOW) TO AVOID PROBS WOULD BE TO MAKE ALL ADJUSTMENTS TO DSCNT/CLB RATE PRIOR TO LAST 1000 FT OF CLB/DSCNT, AND THEN LEAVE IT ALONE.

Data retrieved from NASA's ASRS site as of July 2007 and automatically converted to unabbreviated mixed upper/lowercase text. This report is for informational purposes with no guarantee of accuracy. See NASA's ASRS site for official report.