Abstract: Loess is usually in a saturated state and is called saturated loess when groundwater level is shallow.The 13~(th)、14~(th)、and 15~(th) tunnels of the main canal for the first phase of Yintao Water Supply Project in Gansu pass through saturated loess stratum.The author analyzed the microstructure and chemical composition of saturated loess by comprehensive geotechnical tests and scanning electron-microscope.Based on the derived relationship among its microstructure,the physical-mechanic properties and engineering characteristics,the author recommended that shield method be adopted in excavation of the saturated loess tunnel.