According to the principle and the type of the oil pipeline corrosion, we use the square wave of wide spectrum, strong signal transmission capability and a certain duty ratio as the excitation source of the pulsed eddy current. The finite element analysis software ANSYS is used to establish a three-dimensional finite element model of the pipeline corrosion defects by applying the boundary conditions of square wave excitation to simulate the distributions of current and induced magnetic field in the pipeline under various defect volumes. It can solve the induced voltage variation with time on detection coil, and can accomplish the finite element analysis and the nondestructive testing about the pipeline internal corrosion defects with the insulation layer and the protection layer. The results of the study show: When there is no corrosion defect in the pipeline, the electric current in the pipeline is basically even distribution. The magnetic field is distributed for the symmetrical vortex shape from head to foot, and it has not obviously gather phenomenon. When there are some corrosion defects in the pipeline, the electric current forms partial symmetrical vortex shape in both sides of the corrosion defect, and it is obviously assembled in the defect place. The simulation results of the different size defects show that the maximum magnetic field strength and the maximum current value increase with the defect depth increasing, while the output voltage decreases with the defect depth increasing. By extracting the induced voltage signals on the detection coil in a certain excitation condition, the quantitative detection of the pipeline corrosion defects can be achieved.