Abstract: The classical Poulos’s elastic theory method based on the Mindlin solution in elastic half-space is only suitable for the analysis of pile groups in elastic half-space. It cannot take the layered soil into account. By using stress and displacement solutions of axisymmetric problem in layered elastic half-space, the interaction factor method is extended to the analysis of pile groups in layered elastic half-space. Solutions of a single pile and interaction of two piles in layered elastic half-space are performed by finite difference method firstly. Then the vertical settlement analysis of pile groups in layered elastic half-space is made by considering pile to pile interaction by the Poulos’s interaction factor method. Example analysis shows that the present method agrees with the Poulos’s interaction factor method and the Butterfield and Banerjee’s BEM method in elastic half-space. Calculation of two-layered elastic half-space indicates that the present method is more rigorous than the Poulos's interaction factor method, and agrees with the Chin and Chow's BEM method, which is based on the accurate solution of two-layered elastic half-space. Besides, the proposed method can be used extensively in the analysis of pile groups with dissimilar piles.