Gas transport in shale gas reservoirs is largely affected by rock properties such as permeability. These properties are often sensitive to the in-situ stress state changes. Accurate modeling of shale gas transport in shale reservoir rocks considering the stress sensitive effects on rock petrophysical properties is important for successful shale gas extraction. Nonlinear elasticity in stress sensitive reservoir rocks depicts the nonlinear stress-strain relationship, yet it is not thoroughly studied in previous reservoir modeling works. In this study, an improved coupled flow and geomechanics model that considers nonlinear elasticity is proposed. The model is based on finite element methods, and the nonlinear elasticity in the model is validated with experimental data on shale samples selected from the Longmaxi Formation in Sichuan Basin China. Numerical results indicate that, in stress sensitive shale rocks, nonlinear elasticity affects shale permeability, shale porosity, and distributions of effective stress and pore pressure. Elastic modulus change is dependent on not only in-situ stress state but also stress history path. Without considering nonlinear elasticity, the modeling of shale rock permeability in Longmaxi Formation can overestimate permeability values by 1.6 to 53 times.