The seepage erosion of underground defective pipelines can negatively affect the structure and stability of the surrounding strata, leading to severe urban ground collapses. Revealing the failure mechanism and mechanical characteristic is crucial for their prevention and mitigation. A large-scale physical modeling experiment was carried out and a coupled Computational Fluid Dynamics-Discrete Element Method (CFD-DEM) numerical model was proposed. The microscopic soil-water interactions during the seepage erosion process were researched, and the effects of groundwater, overlying strata thickness, defect size, and particle size were evaluated. Results showed that the groundwater seepage would promote soil movement, and the defective pipeline provided sufficient space. The seepage erosion rate increased with the flow velocity, and when it exceeded the threshold (V