Several field and model tests have been conducted to investigate the impact of pile installation on bearing capacity. However, little is known about how piles behave during installation, how they interact with the surrounding soil, and how this affects sandy soil properties. This review paper investigates the effect of pile driving on surrounding sandy soil as it compacts sandy soil near to the pile. For this purpose, various related literature was studied based on the observation of the pile installation effect on earth pressure or lateral stress, relative density, and pore water pressure in the sandy soil. A change in the deformation and stress state of surrounding sandy soil due to pile driving was presented. The installation of fully displacement piles can lead to significant stresses and deformations in the surrounding sandy soil. This is one of the main causes of uncertainty in the design and analysis of pile foundations. According to this study, the sandy soil around the pile is compacted during pile driving, resulting in lateral and upward displacement. This leads to the densification effect of pile driving on loose sandy soil. Sandy soil improvement with driven piles depends on pile shape, installation method, and pile driving sequences. This study concludes that in addition to its advantages of transferring superstructure load to deep strata, the increased relative density of loose sand, the change in the horizontal stress, and the influence of compaction on the sandy soil parameters during pile driving should be considered during pile design and analysis.