Rock deformation and fluid transport are coupled together in many crustal settings. Nonhydrostatic stress can greatly affect pore structure and transport properties of a rock. When a compact rock is stressed to failure, dilatancy and permeability enhancement are generally observed whether the failure mode is brittle faulting or cataclastic flow. Laboratory data for the brittle faulting regime (in Westerly granite) and for the cataclastic flow regime (in Carrara marble and synthetic halite) are modeled. Dilatancy is simulated by incorporating an increasing number of stress-induced microcracks with similar geometric attributes in a random network model, thus enhancing permeability. The microcracks are represented by sheet-like conduits, with crack length and aspect ratio distributions constrained by microstructural data. Before the onset of dilatancy, a rock under overall compression has very low density of open cracks that occur in isolated clusters with relatively low connectivity. Nonhydrostatic loading induces damage in the form of extensile microcracks that gradually form a fully connected percolation network. Significant permeability increase of up to several orders of magnitude may occur in this percolative regime. Once the crack network is fully connected, the accumulation of additional cracks is not as effective in enhancing permeability, and our model predicts permeability and porosity changes to be linearly related in this fully connected regime. After accounting for the existence of fine cracks that are below the microscope resolution, our simulation results agree reasonably well with laboratory data. ¿ 1999 American Geophysical Union