In heavily urbanised areas, the construction of tunnels underneath existing ones is unavoidable and much caution has to be exercised in both design and construction so as not to undermine the safety of the structure and vehicles. In this paper, a non-linear soil-tunnel interaction model is developed to evaluate the tunnel behaviour that is induced by a new undercrossing tunnel excavation. A barrel interface is proposed between the existing tunnel and surrounding soil, and effects of soil-tunnel interaction are considered by implementing limiting forces; depending on the stress conditions at the tunnel-soil interface, either separation or elastoplastic yielding can thus be modelled. Through validation with the centrifuge test results and instrumentation data from a field case study, it is shown that the proposed model can provide an accurate evaluation of tunnel behaviour. A parametric study also highlights the importance of considering tunnel-soil interaction when analysing the influence of volume loss and structural stiffness on the response of the existing tunnel. Finally, dimensionless design charts are provided as a preliminary evaluation tool in tunnel design.