A large change in the structure, density, and chemical and phase composition occurs in nuclear fuel with deep burnup, and an edge zone is formed. Simulation of the formation of an edge zone in a fuel kernel of thermal reactors will make it possible to suggest ways to decrease its influence on the characteristics of a fuel element. In the present work, the neutron-physical processes occurring in the peripheral layer of a fuel kernel are simulated. The distribution of nuclear reaction rates along the radius of a fuel pellet is calculated using the SCALE-4.3, MCNP-4B, and UNK computer programs. The radial dependence of the local breeding ratio is calculated. It is shown that for fresh fuel BR > 1 for fissile nuclei in a 100 µm thick layer, while the initial BR averaged over a pellet is no more than 0.5. The volume energy distribution in a 100 µm thick peripheral layer is 30% higher than the average value over a pellet. A combined pellet, where the central part possesses the standard enrichment (4-5% 235 U) and the peripheral layer contains less than 0.7% 235 U, is proposed to decrease the influence of the edge zone on the properties of fuel.The main goal of scientific and technical development work in fuel-cycle power reactors is increasing fuel burnup and the reliability of fuel assemblies under operating conditions. This is achieved mainly by increasing the initial fuel enrichment and by using consumable absorbers. However, an increase of burnup leads to the development of processes that affect the integral characteristics of fuel elements. One such process gives rise to an edge zone with an easily distinguishable altered microstructure on the periphery of the fuel pellets. The structure of the edge zone is characterized by the presence of many fine gas bubbles, vanishing of the initial grain structure, and formation of new, much smaller subgrains (<1 µm) [1,2].It has been found experimentally that an edge zone starts to form in uranium dioxide fuel pellets in thermal reactors at burnup higher than 45-50 MW·days/kg. This layer is 100-200 µm thick and is characterized by much higher burnup than the main part of the fuel pellet. Thus, for average burnup 50 MW·days/kg the burnup in a 100 µm thick peripheral layer will reach 80 MW·days/kg, and the burnup directly on the surface of a pellet will reach 150 MW·days/kg.The formation and development of an edge zone where the porosity is 3-5 times higher than the initial porosity creates a barrier for heat flow from fuel to cladding and degrades the thermal conductivity of the fuel-cladding gap with emission of gaseous fission products. An increase of the fuel temperature and the emission of gaseous fission products from the edge zone will increase the pressure on the cladding of a fuel element, which can have a large effect on the characteristics of the fuel element. Simulation of the processes resulting in the formation of an edge zone will make it possible to suggest ways to decrease the effect of such a zone on the characteristics of a fuel element.