The present study investigates the Finite Element Method (FEM) within a pressure-deformation framework to determine the minimal pressure essential to prevent tunnel collapse. The investigation utilizes a stepwise reduction of the supporting pressure of the tunnel to generate a pressure versus deformation plot. The double tangent method is then applied to identify the critical collapse pressure. Analysis of a circular tunnel in homogeneous Mohr–Coulomb material is conducted using a two-dimensional finite element model created in PLAXIS2D. The model encompasses both drained (predominantly sand) and undrained (primarily clay) soil conditions. The selection between drained and undrained stability analyses hinges on the ground type and tunnel face advance rate. The study explores the complexities of drained stability analysis, considering an examination of both associated and non-associated flow rules. Additionally, the study investigates the impact of varying the dilation angle under drained conditions. The numerical results are compared with experimental approaches, such as existing centrifuge model test results, and analytical studies like limit analysis methods documented in the available literature. Positive agreement is evident in the comparisons. This validation process serves to underscore the reliability and applicability of the FEM-based pressure-deformation framework in assessing the stability of circular tunnels under both undrained and drained conditions. FEM allows for a detailed and accurate simulation of the behavior of the tunnel, providing insights into the complex interactions between supporting pressure and deformations and aiding in the identification of pre-failure behavior and critical collapse pressure.