Based on nonlinear finite element method, the influence of tunnel construction on adjacent underground pipeline is studied. It is shown that remarkable settlements occurred above tunnel working surface due to tunnel excavation, and soil bulged below tunnel working surface due to load-off. The inhomogeneous deformation of pipeline become more serious when the distance between tunnel working surface and pipeline become shorter. So it is important to keep enough distance between tunnel working surface and pipeline. The deformation of pipeline become less when the radius of tunnel decreased. It is also find that there is no obvious influence on settlement of pipeline with different materials of pipeline. The settlement of pipeline can be reduced and stability of tunnel can be enhanced evidently by local excavation above tunnel working surface. Therefore, local excavation above tunnel working surface can be prior used to protect underground pipeline if allowable.