Abstract: Steel penstocks embedded in rock are being widely used in middle and large scale hydroelectric projects, whose scales are getting larger and larger. The value of HD exceeds the value set by the Code,and the method suggested by the Code can not embody the real load bearing capability of the materials under the internal water pressure. So it can not meet the need of construction of modern hydroelectric projects. In this paper, the authors take into account for the elastic and plastic behavior of filled concrete and surrounding rock, consider the effects of initial geostress and secondary geostress caused by excavation and supports, and the bending and shear effects of steel lining subject to internal water pressure, apply the penalty function in the strength analysis and develop a nonlinear finite element method program. With the program, the authors analyze a project example and get some useful conclusions for the project design.