•A two-stage analysis method is proposed for analyzing the issue of local crack expansion in buildings under the influence of pit construction.•A three-dimensional fluid–solid coupling model of pit construction was established, along with a local structural crack expansion model based on XFEM.•The numerical model takes into account the initial cracks in the building and analyzes the impact of the size of these initial cracks.•Crack expansion control measures for damaged buildings are proposed. In response to safety concerns arising from pit construction near existing damaged buildings, this paper introduces a two-stage analysis method. Initially, the finite element method is utilized to construct a comprehensive model of pit excavation, enabling the analysis of building settlement and internal forces induced by the construction activity. Subsequently, the resulting building settlement vectors are employed as displacement loads in a localized structural model established via the extended finite element method. This facilitates the examination of crack propagation within the damaged building under settlement influence. Application of the proposed method to a new pit construction scenario reveals a maximum differential settlement of the building at 5.35 mm. As building settlement increases, crack propagation within the building follows a slow-fast-slow trend, with an approximate crack propagation length of 9.6 m and an average depth of 0.13 m. Notably, deeper and longer initial cracks exacerbate wall crack propagation, leading to cracks penetrating the wall when initial crack depths exceed 100 mm. Furthermore, crack propagation extends to the slab, resulting in a 10.2 m long of crack when initial crack depth is 66 mm. A case study demonstrates the effectiveness of the proposed two-stage analysis method in addressing crack propagation issues in existing buildings during pit construction.