In today’s scenario, the living conditions in major metro cities depend mainly on the appropriate functioning of drainage pipelines. In India, there are many cases of pipeline failures reported in the recent past due to underground pipe leakage. In these failure cases, the sinkhole formations are the main problems due to interaction between leaked water from the pipe and the ground. Hence, there is a need for extensive investigations for avoiding this kind of failures in metro cities. In view of the above, this paper is aiming at to investigate the ground responses due to the effect of drainage pipe leakage using PLAXIS 3D-based finite element analysis. In the analysis, the pipe response was simulated by assuming a linear elastic material, and the soil was assumed to be a nonlinear material. The pipe leakage was simulated at the center along the length of pipe at which top and bottom on the surface of pipe by applying seepage boundary condition. The parametric studies were carried out with varying diameter of the pipe, type of pipe, and relative density of the sand. The numerical results reveal that the change in deformation and stress conditions on the ground depends mainly on type of soil, pipe diameter, and pipe material.