<p>In-situ estimation of the subsurface rock permeability from pressure transient tests predominantly relies on flow-only models of pore fluid flow while overlooking the rock deformation effect on pore pressure variations. Despite widespread use, the flow-only approach can systematically bias permeability estimates when substantial flow–geomechanics coupling is present, yet the geomechanics aspect has received little attention in the field practice or literature on pressure transient analysis. This limitation is herein evaluated through a coupled poroelastic analytical solution for pressure transient analysis of a layered configuration consisting of a permeable rock layer confined in between two impermeable seal formations with contrasting mechanical properties. Fluid is produced through a vertical well within the permeable layer. The coupled governing equations for pore fluid continuity and solid stress equilibrium are solved analytically using Laplace–Hankel integral transform. The solution is rigorous, general, and definitive, as it imposes no restrictive assumptions on the stress or strain state of the layers or on the intralayer tractions. Three practical cases of pressure drawdown, pressure buildup, and interference tests are analyzed via the solution. Results indicate that rock deformation effects are negligible for mechanically homogeneous systems, where the permeable and seal rocks have similar stiffness. In contrast, neglecting the geomechanical coupling in pressure transient analysis can introduce considerable errors in permeability estimates for mechanically dissimilar reservoir–seal rock systems. The rates of these errors could exceed 30% for a tenfold contrast in cross-layer heterogeneity, as quantified by the stiffness ratio between the permeable and seal rocks.</p>