The transition zone was defined as an interface with certain thickness, strong heterogeneity and anisotropy in the vertical profile for layered formations, which had great effect on hydraulic fracture (HF) height propagation. In this paper, a numerical model for transversely isotropic layered shale with transition zone was established by utilizing the extended finite element method (XFEM) based on cohesive zone model (CZM). The effects of in-situ stress, dip angle, anisotropy and tensile strength of transition zone, and anisotropy of shale matrix, and injection rate on fracture vertical propagation behavior were investigated. Dimensionless fracture offset distance in transition zone (DFODT) and dimensionless fracture height (DFH) were defined to quantitatively evaluated the results of hydraulic fracture vertical propagation. Numerical results showed that the transition zone could induce the HF to turn and distort within and between layers, significantly improving the degree of fracture tortuosity. Also, the greater the DFODT, the smaller the DFH. The anisotropy of transition zone and coefficient of effective vertical stress difference had the greatest influence on DFODT; anisotropy of shale rock and injection rate had the greatest influence on DFH; while tensile strength of transition zone had a relatively weaker influence on both DFODT and DFH.