Abstract: To clarify the micromechanical mechanisms of failure in deep water-bearing rock masses, uniaxial compression tests, PFC3D particle-flow simulations, and digital image correlation (DIC) were combined to investigate the nonlinear effects of water content and stress state on the macro- and micro-failure behavior of fine sandstone under hydro-mechanical coupling. Results indicate that moisture content governs the transformation of failure modes. As water content increased from dry to saturated, failure evolved from multi-level bifurcated tensile cracking to a shear-tension composite failure in the semi-saturated state, and ultimately to brittle slab failure dominated by a single main crack under saturated conditions. Concurrently, the crack-initiation threshold decreased from approximately 40% to 25% of peak strength. Increasing confining pressure inhibited crack bifurcation and increased the proportion of shear cracks; however, this strengthening effect sharply diminished with higher water content. In the semi-saturated state, the structural shear effect induced by heterogeneous water distribution was pronounced, with the proportion of shear cracks under uniaxial compression (64%) comparable to that at low confining pressure (5 MPa, 68%). These findings indicate that hydro-mechanical coupling is not a simple linear superposition but a complex, non-monotonic interaction. The semi-saturated hard-soft alternating structure promoted the formation of conjugate shear bands under confining pressure. Conversely, in the saturated state, pore-water pressure partially offset the confining-pressure constraint, maintaining brittle slab-failure characteristics by reducing effective stress and intensifying tensile stress concentration at crack tips. The revealed nonlinear interaction between water content and stress environment on crack-type proportions and energy-release paths provides a theoretical basis for evaluating stability and designing support for surrounding rocks in deep, water-rich roadways.