Pipelines are used to provide variety of services in modern community and have grown rapidly in past few decades due to growing socio-economic requirements. Most of the water mains are buried in shallow depths where the soil is partially saturated with significant spatial and temporal variations. Even though the behavior of buried pipes in such unsaturated soil condition is substantially different when compared to dry or fully saturated soil, the effect of soil saturations is overlooked in the current pipe stress prediction methods, leading to unrealistic predictions of the pipe stresses. In this study, three-dimensional (3D) finite element (FE) method was employed with advanced constitutive soil models to analyze the behavior of pipes buried in unsaturated soil condition. Having validated the FE model using reported field test data, an analytical model was proposed to predict the maximum stress in buried pipes considering soil saturation effect using a series of 3D FE analyses. Results from the FE analyses reveal that the maximum pipe stress can be significantly different when soil is in unsaturated condition when compared to dry condition. The proposed formula shows a good agreement with the field data and FE results, so that the expression can be used in the prediction of maximum pipe stress when they are buried under realistic (i.e., nondry) soil conditions.