This paper presents a numerical investigation on the improvement mechanism of dynamic compaction (DC) in saturated soil of a weak layer with high levels of groundwater, using an improved fluid–solid coupling method with a Drucker–Prager–Cap soil model. The numerical model is verified by comparing with published test data at first, which show that the dual-phase coupling method can approximately reflect the development law of excess pore water pressure and the improvement effect of layered saturated soil foundation under DC. Then, based on the numerical model, the influences of the thickness and depth of the weak layer as well as tamping energy on the development and dissipation of excess pore water pressure, effective stress, and the relative degree of reinforcement during DC were investigated. The results showed that the embedment depth and thickness of the weak interlayer may greatly affect the effective reinforcement depth of DC. Meanwhile, the tamping energy and the groundwater table also play a great role in the improvement of the layered saturated soil under DC. The groundwater table should be lowered by dewatering or adding a drainage layer to achieve a better compaction effect during DC.