The second‐order waveguide impedance boundary condition is first combined with the perfectly matched layer (PML) for the time‐domain finite‐element (TDFE) simulation of waveguide problems. The formulation is validated by numerical examples. The results clearly show that the reflection errors obtained by the second‐order waveguide impedance boundary condition are less then −20 dB, and the PML backed with the second‐order waveguide impedance boundary condition has a better absorbing effect than the PML backed with the perfect electrically conducting (PEC) wall. Under the same constant conductivity situation, PML terminated with the second‐order waveguide impedance boundary condition can reduce about 10 cells of the PML thickness when compared with the PML terminated by PEC wall. Therefore, the proposed boundary conduction can reduce the number of the unknowns and provide an effective mesh truncation method for the time‐domain finite‐element method solution of waveguide problems. © 2009 Wiley Periodicals, Inc. Microwave Opt Technol Lett 51: 2870–2874, 2009; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/mop.24774