The underground powerhouse of a hydropower station, in the form of a cavern group, is generally characterized by a large scale and complicated spatial structure. During the construction phase, extensive excavation in limited underground space may cause a multi-cavern effect between adjacent caverns and thus lead to deformation and failure of the surrounding rock mass, which undoubtedly compromises cavern stability and construction safety. This paper takes the drainage gallery LPL5-1 in the Baihetan underground powerhouse (adjacent to the main powerhouse) as a case study. During the excavation of the main powerhouse, the shotcrete at the upstream arch of LPL5-1 cracked, ballooned and peeled off. After field investigation and numerical simulations, the stress evolution induced by excavation is studied and the failure mechanism is analyzed. The results indicate that the multi-cavern effect led to the surrounding rock mass failures in LPL5-1, which is related to the continuous excavation of the main powerhouse and the resultant extensive stress adjustment. During the main powerhouse excavation, a stress concentration zone was generated at the upstream arch and was intensified with the excavation progressed. The expanded stress concentration zone affected LPL5-1 and made its surrounding rock mass split, thus causing the shotcrete cracking.