Hydraulic expansion of submerged tubes is accomplished by propelling a mandrel through it using differential pressure. This process deforms the tube beyond its elastic limit. Toward the end of the expansion process, the mandrel pops out of the tube resulting in displacement, stress, and pressure waves propagating through the system. A mathematical model has been developed to describe the dynamics of the tube-fluid system due to the pop-out phenomenon. The model takes into consideration the coupling effect between fluids and the structure, as well as the inherent system damping of its response. An analytical solution describing the wave propagation in the tube-fluid system was obtained. The model identified the potential failure locations and showed that the inherent system damping reduced the chances of failure but could not eliminate it completely. In addition, it showed that the coupling effect was more prominent in the tube as compared to the outer and inner fluids. Furthermore, a sensitivity analysis was conducted in order to investigate the effect of the geometrical and material properties on the response. The sensitivity analysis showed that the coupling effect vanished with the increase in tube stiffness and reached an asymptotic value with an increase in formation stiffness.