<p>The construction of tunnels in geomechanically complex environments faces significant challenges due to the presence of fault zones, fractures, and high overburden stresses. In this paper, the mixed-mode phase field fracture model is used to investigate the propagation of fractures in fluid-saturated rock formation under the influence of overburden load during underground excavation in a hilly region. A numerical model based on the finite element method is developed considering the phase field formulation, poro-elastic deformation, saturated flow in fracture and porous rock, and permeability evolution due to fracture growth. The simulation results reveal that underground excavation for the construction of a tunnel in a homogeneous rock formation without any natural fracture may not induce the growth of any fractures. In contrast, under the same geometric and loading conditions, a rock formation with pre-existing natural fractures experiences significant growth of fractures which predominantly exhibits Mode II behavior, due to shear failure of rock . In this case, a continuous fracture forms, and along that the rock can slide up to a few cm. Furthermore, this study emphasizes the role of fluid saturation. The growth of the fractures significantly enhances the permeability around the tunnel. In the present case, it leads to approximately 5&#xa0;L/d/m of groundwater discharge into the tunnel. With regard to tunnel construction in fractured rock formation underneath a hill slope, this study accentuates two important consequences of fracture propagation: i) instability of the rock mass above the tunnel and ii) noticeable groundwater seepage into the tunnel.</p>