As the concrete dam body is an important building structure, it has important theoretical and practical significance to analyze and evaluate the damage degree correctly, and to the dam safety design, the remaining life evaluation, and the structure’s appraisal and maintenance after the earthquake. This paper researches the static and dynamic simulation analysis of the cracks’ dynamic development in the slope stability and the process of the dam’s unstable failure respectively, combined with the engineering practice and based on the effective stress principle, seepage theory, slope stability theory, damage theory and the strength reduction limited theory with the extended finite element numerical simulation technology, and get the following main conclusions:(1) Establish the damage instability mathematical model under the coupling of seepage field and stress field of the concrete dam body;(2) Analyze the static simulation of the dam by using the strength reduction principle, get the stress, strain and displacement distribution rule and the corresponding safety factor in the water level change and rainfall infiltration, two working conditions of the reservoir’s retaining dam body respectively, get the displacement of the slip plane when the unstable failure happens on the dam, the influence of the reservoir’s water level on the dam’s safety factor, and the influence of the rainfall infiltration on the dam’s stability;(3) Research the earthquake response and the dynamic simulation analysis of the cracks’ dynamic extension under the action of fluid-solid coupling with extended finite element technology on concrete dam body to get the vibration mode distribution law in the situation of dam’s free vibration, which shows the rule that the tension failure and the shear failure appear at the same time, the positions where the damage failure happens successively and the damage degree of the dam’s material during the earthquake action, so that the positions where the cracks’ appear of the dam, the moment, the developing direction, the expanding velocity rule of the dam, the influence of the distribution law of the stress, the displacement, and the hydrostatic pressure on the stability of the dam;(4) The instability and the collapse of the dam are induced by both the action of earthquake and reservoir. The damage unstable failure analysis of the dam under the action of fluid-solid coupling is more closed to the actual situation, and it has important guiding value for the dam’s construction and maintenance.