Abstract: The construction of water diversion power stations or long-distance water conveyance projects inevitably encounters challenges related to crossing active faults. Selecting an appropriate lining structure type for hydraulic tunnels that traverse active faults is a key technical issue in such engineering projects. Based on the actual conditions of a specific project, this study demonstrated the feasibility and rationality of a multi-layer flexible composite lining structure using the finite element numerical analysis method. Meanwhile, the influences of fault dislocation amount, fault width, fault strike, and section length on the stress and deformation of the lining structure were analyzed. The calculation results indicate that as fault displacement increases, both the deformation and stress of the steel lining exhibite an increasing trend. Due to the installation of expansion joints and external cushion layers, the steel liner can deform freely. For every 100 mm increase in fault displacement, the stress increase in the steel liner does not exceed 2%. Under a given fault displacement condition, a smaller fault width is more unfavorable for the stress state of the steel lining structure and the arrangement of expansion joints. When the pipeline is orthogonal to the fault, the stress condition of the steel liner is optimal. Longer steel pipe sections and fewer expansion joints result in greater displacement accommodated by a single expansion joint, which is more unfavorable for the steel lining structure. After comprehensively comparing results for different steel pipe section lengths, a section length of 5 m with multiple expansion joints is considered appropriate for this project. The research findings can provide a reference for the structural design of underground penstocks in dealing with fault creep deformation.