Geological discontinuities govern the strength and deformation of rock mass and play an important role in the stability of geotechnical excavations, such as tunnels, caverns, slopes, and mines. In this paper, the failure mechanism of a tunnel in the vicinity of a fault zone is investigated by physical model tests with dimensions of 3 m × 2.4 m × 0.4 m, in which the non-contact Digital Image Correlation (DIC) technique is employed to provide full-field displacement measurements. Results show that the fault zone near the tunnel shoulder has a significant influence on the stability of the surrounding rock, in terms of strain localization and failure initiation. With the increase of surcharge loading, cracks initiate at the two sidewalls, following by the initiation of cracks at the left shoulder and the crown. Cracks propagate to the fault zone eventually, leading to asymmetrical collapse. The stress loosening zone (SLZ) in the surrounding rock after tunnel excavation is significantly influenced by the fault zone near the left shoulder of the tunnel, showing the occurrence of stress redistribution. It is recommended to implement reinforcement in the rock mass between the tunnel and the fault to improve the stability.