In this work, a 3D finite element (FE) based model was developed to assess the condition of an underground hydrogen transmission pipeline containing a corrosion defect under combined internal pressure and soil movement-induced axial compression. The use of mechanical properties of X100 pipeline steel under different hydrogen charging time models the degree of hydrogen damage in pipelines. Parameter effects, i.e., axial compressive stress, hydrogen damage, defect geometries, and pipeline diameter-to-thickness ratio, were determined. The results demonstrated that the synergistic effect of axial compression, internal pressure, corrosion, and hydrogen damage can lead to a significant decrease in the failure pressure of pipelines. The failure pressure decreased with the wall thickness reduction and increased hydrogen damage, axial compressive stress, defect length, defect depth, and pipe diameter. The competitive effect was observed between the degree of metal loss and hydrogen damage in determining the burst capacity of pipelines. In situations where the pipeline integrity was severely compromised, the failure pressure exhibited minimal reduction despite the increasing severity of hydrogen damage. The stress distribution at the defect zone was influenced by axial compressive stress but remained unaffected by hydrogen damage under normal operating conditions (i.e., an internal pressure of 10 MPa). This work is expected to help operators understand the applicability of elder and in-service pipelines for hydrogen transmission.