Abstract: Given the limitations of traditional grid-based numerical methods in simulating large deformation problems of geotechnical materials, this paper applies a meshless numerical method—Smoothed Particle Hydrodynamics (SPH)—to a full process simulation of shield tunnel excavation instability, including the gradual instability of the soil to the ultimate equilibrium state and the large deformation collapse after soil failure. First, an SPH model for shield tunnel excavation is established. The SPH simulation results are then compared with theoretical solutions and the ultimate support force and excavation face failure patterns obtained from model tests, validating the feasibility of the SPH method in analyzing tunnel excavation instability and large deformation problems. Next, the entire excavation instability process is simulated under no support force conditions, and the effects of three key parameters—buried depth ratio, internal friction angle, and cohesion—on large deformation collapse after soil failure are analyzed. The research results provide a new analytical method and perspective for addressing tunnel large deformation problems in the future.