The invention discloses a circumferential variable-cross-section expanding excavation method of a tunnel. After a steel supporting frame, a counter-force frame and a circumferential expanding excavation shielding mechanism are installed in an initial working well, an ejection device can drive the circumferential expanding excavation shielding mechanism to perform circumferential tunneling, and under the cooperation of a duct piece splicing mechanism, a control device, a hydraulic transmission device, a cinder discharging mechanism and other back-up systems, radial expanding excavation work ofa first ring of the original tunnel is completed; then, a steel pipe-arch frame supporting structure is erected at the position, adjacent to an area for circumferential expanding excavation, of one side of an initial expanding excavation space, soil body excavation work making a cross section gradually expanded and reinforced concrete lining are constructed in the area for circumferential expanding excavation starting from the side, located at a steel arch frame, of the area for circumferential expanding excavation, finally a horn-shaped variable-cross-section segment is formed in area for circumferential expanding excavation, the circumferential variable-cross-section expanding excavation of the tunnel is completed, and in the whole circumferential variable-cross-section expanding excavation process, no ground space is occupied, traffic is not hampered, and ground buildings are not damaged.