<p>In the in-situ recovery of oil sands, inclined heterolithic strata (IHS) may hinder the developments of steam chamber and play a negative role in bitumen production. Efficient operations require understanding IHS’s impact on deformation, failure and permeability evolutions at both laboratory and reservoir scale. This study employs a coupled FLAC3D–PFC model, integrated with a CFD solver, to investigate the flow-geomechanical behavior of IHS and help to link it with the permeability evolution of IHS during a steam assisted gravity drainage (SAGD) operation. After matching the flow and geomechanical response of reconstituted IHS specimen, samples with varying mud content and inclination angles are tested through a series of triaxial compression tests simulations. By analyzing the sensitivity of the mechanical properties, including shear strength, elastic modulus, and friction angle, it is found that sample strength and modulus are primarily controlled by mud content, while the friction angle and corresponding shear strength are significantly affected by both mud&#xa0;content and the inclination angle of the mud. Notably, a U-shaped strength variation appears at inclination angle of 45 ~ 60°, where sliding along bedding planes becomes the most favorable failure mode. Changes in sample permeability are largely affected by the pore structure change and crack propagation. A novel permeability model is proposed by leveraging the capabilities of DEM to analyze permeability variations of IHS in conjunction with crack propagation and failure modes, thereby quantifying permeability changes induced by macroscopic deformation and crack generation from a microscopic perspective. In this study, the mechanical properties and failure process of IHS under triaxial compression are reconstructed and analyzed. The developed model provides an effective framework for quantifying the change of mechanical properties and permeability for IHS and can be easily extend to other heterogeneous rocks with interbedded weak layers.</p>