Microseismic monitoring in Barnett Shale indicates elliptical zones of failure propagating away from the wellbore and confirms the development of shear fracturing as the main failure mechanism arising from hydraulic fracturing operation. This paper presents a new technique for numerical modeling of both the creation and propagation of shear fractures in fluid induced fracturing. The method employs a coupled geomechanical/single phase flow code. The main role of the geomechanical module is to predict shear failure and provide fracture information to the flow module so that the permeability tensor can be updated accordingly during any coupling loop. In this paper, the technique, constitutive models and formulation implemented to develop the code are briefly presented. Brick type finite elements are used to model the geomechanical as well as the flow parts of the coupled problem. At any time step, the change in the effective stress tensor induced by the block pressure alteration is calculated in the geomechanical module. If the block is not initially fractured, it will be transformed into a fractured block when the shear failure criterion is attained. A pseudo continuum technique is developed and implemented to describe the mechanical behaviour of the fractured rock in which both normal and shear deformation of the fracture are taken into consideration. An example problem is shown to illustrate the application of this work to hydraulic fracturing modeling. This fundamental integrated study is an important advancement in fracture modeling as previous published techniques do not model the shear mechanism rigorously. The work can be extended and applied in other types of fluid injection operations which involve fracturing, such as coalbed methane and CO 2 storage. Introduction Geomechanical evidence for shear failure and shear deformation exists in many oil and gas fields. For example, in the Ekofisk field in the Norwegian sector of the North Sea, the deviatoric stress (between the vertical and horizontal stresses) has increased during production up to the shear failure level and shear fractures were created in the chalk. Fracture shear deformation is usually associated with dilation and permeability enhancement. This phenomenon justifies the productivity improvement during the field production period despite the pore pressure reduction and reservoir compaction (Teufel and Rhett 1991). In another analysis of this field, Chin et al. (1993) have postulated, based on Ekofisk production history and laboratory data, that shear induced fracturing has substantially contributed to the formation compaction, especially at the flanks of the reservoir. They tried to simulate the shear induced compaction in the field during production and water injection using the DYNAFLOW code and obtained some realistic results for field compaction, but the enhancement of the formation rock permeability was not investigated. Even for the compaction calculations, their model suffers from the simplifying assumptions about the strain-stress model. ∑...