A novel algorithm was developed based on the two-phase mixture theory within the framework of Smoothed Particle Hydrodynamics (SPH) aiming at simulating the complex soil-water-structure interaction when soil undergoes large deformation. In the algorithm, each constitute is assumed to occupy a certain part of the macroscopic mixture and satisfies its own conservation equations. The soil-water interaction force was composed of pore water pressure and viscous drag force. The spudcan was assumed to be rigid. Frictional sliding contact was employed to modify the momentum equation for particles located near or on the structure surface. With the proposed algorithm, it can investigate the pore water pressure, the effective stress and the porosity for soil undergoing extremely large deformation. Afterwards, its application to the simulation of continuous penetration of the spudcan was presented. The calculated pore water pressure and penetration resistance were compared to the previous research, indicating promising robustness and applicability of the present algorithm. Furthermore, the proposed algorithm could be a potentially efficient tool helping to solve other problems involving soil large deformation and complex soil-water-structure interaction such as deep penetration, underwater excavation, piping and so on, which is quite difficult dealing with traditional mesh-based methods.