Leakage is the main concern in steel bolted liquid tanks and past experience has indicated serviceability problems due to leakage, mainly from the joint locations, even in situations where the tank has only been subjected to an internal hydrostatic pressure. In this study, the performance of this type of construction was investigated using a detailed finite element (FE) analysis technique. Moreover, the validity of the American Water Works Association design practice in terms of the safe design of this type of structure at a wide range of service loads is evaluated through a parametric study. The FE analysis was performed in two stages using shell and solid elements in a three-dimensional ANSYS environment including the effect of geometric nonlinearity. The proposed FE model could estimating the behaviors such as capacity curve, yield/failure pattern, and the occurrence of ovalling and curling in bolted connections. In addition, the FE results were compared with experimental ones and found to be generally in good agreement. This study shows that a bolt arrangement chosen by design can efficiently improve the joint performance. Further, the use of a limited deformation criterion in the leak-resistant design of bolted lap joints in steel liquid containers is recommended.