Tunnel systems in the hilly loess region of northern China are among the largest and most complicated in the world. Tunnel formation and development processes were investigated in the Yangdaogou catchment over the period of 1989 through 2002. Newly formed tunnels on the roads in the Wangjiagou watershed were also examined in detail during a single storm in 2002. Soil samples were taken from various locations of the tunnel systems in the Yangdaogou catchment for chemical and physical analyses. The controlling factors of tunnel formation are surface drainage conditions and soil materials. Rapid downward mechanical erosion by storm flows seems to be responsible for the original formation of inlets. All tunnels are found in loess and none was found in red Tertiary earth. Underground tunnel paths often develop right above an impeding layer, mainly resulting from mechanical erosion rather than chemical dissolution. New inlets develop in old tunnel systems in two major ways. One is roof collapses of an existing tunnel path and the other is the mechanical scouring action of storm flows. A tunnel system can expand upslope or downslope but the associated processes differ. Upslope expansion often starts with the formation of one or more inlets resulting from surface washes, followed by the development of an underground tunnel path. Downslope development of a tunnel system is characterized by uneven enlargement of tunnel paths. This study suggests that the key to control of tunnel development is reducing surface water entering a tunnel. Tunnel systems in the hilly loess region of northern China are among the largest and most complicated in the world. Tunnel formation and development processes were investigated in the Yangdaogou catchment over the period of 1989 through 2002. Newly formed tunnels on the roads in the Wangjiagou watershed were also examined in detail during a single storm in 2002. Soil samples were taken from various locations of the tunnel systems in the Yangdaogou catchment for chemical and physical analyzes. The controlling factors of tunnel formation are surface drainage conditions and soil materials. Rapid downward mechanical erosion by storm flows seems to be responsible for the original formation of inlets. All tunnels are found in loess and none was found in red Tertiary earth. Underground tunnel paths often develop above an impeding layer, mainly resulting from mechanical erosion rather than chemical dissolution . New inlets develop in old tunnel systems in two major ways. One is roof colla pses of an existing tunnel path and the other is the mechanical is scouring action of storm flows. A tunnel system can expand upslope or downslope but the associated processes differ. by the development of an underground tunnel path. Downslope development of a tunnel system is characterized by an enlarged enlargement of tunnel paths. This study suggests that the key to control of tunnel development is reducing surface water entering a tunnel.