Abstract: The Lishan Tunnel is a key component of the south trunk line in the third phase of the Hanjiang-Weihe River Diversion Project, facing potential dislocation hazards as it crosses the Lishan Piedmont Fault. This study first estimated the fault displacement based on historical activity data and empirical formulas; then determined the required tunnel protection length using numerical simulation; and finally analyzed the extent of tunnel damage through numerical simulation by integrating OLDT, OLDC, and diameter deformation rate. The results indicate: (1) Under seismic conditions, the dislocation at the tunnel crossing is approximately 0.32 m, leading to a recommended design dislocation parameter of 0.35 m. (2) For a burial depth of 350 m and a dislocation of 0.35 m, the damaged section of the monolithic tunnel lining is confined to within 5 m of the fault—4.8 m in the hanging wall and 4.7 m in the footwall. It is recommended that the protective structural section extend 5 m into both the hanging wall and the footwall. (3) Different damage indicators show consistent trends but vary in spatial extent. Generally, the affected section is slightly longer in the hanging wall than in the footwall based on OLDT and OLDC indices; tensile and compressive damage is more severe in the hanging wall, while the overall diameter deformation rate is higher in the footwall. When determining the protection length, multiple damage indicators should be integrated to avoid limitations associated with relying on a single index.