Abstract: In order to analyzes the soil deformation mechanism under the impact load of the step-bit, the finite element model of impact and displacement drilling with down the hole hammer (DTH) is established on the basis of adopting Drucker-Pager yield criterion, taking soil as DP materials and simulating the drilling process by applying the impact load on soils. Based on the finite element method of non-linear transient dynamics, the soil deformation mechanism is studied with the commercial finite element code ANSYS9.0 which has the capability of simulating large-strain frictional contact between two or more solid bodies. Research results show that the impact energy is mainly used to compress soils in vertical direction while the compress effect is smaller in horizontal direction. The behavior of step-bit acting on soil can be considered as mini-shear effect which destroys soils along the equivalent cone surface when the bit’s step is disposed appropriately. Then the failure soil is compacted around the hole-wall.