The hole flanging process, in which a pre-holed workpiece is expanded by a larger punch, is frequently used in many industries. However, due to the large number of process parameters and their complicated relationships, poor flange edge squareness is commonly generated and results in an increase of secondary operation. In this study, to improve the quality of flange parts, finite element method (FEM) was used to investigate the flange-forming mechanism and effects of upward and downward burr orientation flange-forming directions. Laboratory experiments were performed to validate the accuracy of the FEM simulation results. The FEM simulation results clearly explained the flange-forming mechanism, as well as the effects of flange-forming direction, based on stress distribution analysis. Upward and downward burr orientation flange-forming directions were suitably applied for large and small hole expansion ratios, respectively. In addition, the effects of other process parameters related to the flangeforming direction, including punching clearance, flange thickness, and hole expansion ratios, were also investigated. The FEM simulation results showed good agreement with the laboratory experiments. These results showed that to achieve good squareness at the flange edge, the use of upward and downward burr orientation flange-forming direction and its relation to the other process parameters need to be considered.