Abstract The discrete-element method (UDEC — Universal Distinct Element Code) was used to numerically model the deformation and fluid flow in fracture networks under a range of loading conditions. A series of simulated fracture networks were generated to evaluate the effects of a range of geometrical parameters, such as fracture density, fracture length and anisotropy. Deformation and fluid flow do not change progressively with increasing stress. Instability occurs at a critical stress and is charzacterized by the localization of deformation and fluid flow usually within intensively deformed zones that develop by shearing and opening along some of the fractures. The critical stress state may be described in terms of a driving stress ratio, R = (fluid pressure — mean stress)/1/2 (differential stress). Instability occurs where the R ratio exceeds some critical value, R C , in the range −1 to −2. At the critical stress state, the vertical flow rates are characterized by a large increase in both their overal magnitude and degree of localization. This localization of deformation and fluid flow develops just prior to the critical stress state and may be characterized by means of multifractals. The stress-induced criticality and localization displayed by the models is an important phenomenon, which may help in the understanding of deformation-enhanced fluid flow in fractured rock masses.