This paper studies the activity and characteristics of main active faults in the Lijiang region, discusses the evolution of structural stress field and features of modern stress field, and probes into the mechanism of the Lijiang earthquake on February 3, 1996. By using the discrete element method, the stress field is simulated, which deepens the understanding of the stress field of the Lijiang earthquake. The Lijiang region is situated in a triangle tectonic block bordered by the NS-trending Chubo-Baihanchang fault, the NE-trending Lijiang- Xiaojinhe fault and the NW-trending Zhongdian-Yongsheng fault. Geological and seismological studies indicate that in the region the maximum principal stress is in the NNW-SSE direction. In such a stress field, the NE-trending Lijiang-Xiaojinhe fault is dislocated reversely with the left-lateral movement, and the NW-trending Zhongdian-Yongsheng fault is dislocated right-laterally. It is such a dislocation pattern of faults that causes the Judian-Jiuzihai block between the faults to move westward, thus producing local tensile stress of the east-west direction, leading to normal faulting of the fault at the east of Yulongxueshan Mountain, generating the M 7. 0 earthquake on February 3 of 1996. The mechanism of an after-shock on February 5 with a magnitude of 6. 0 south of the epicenter further indicates that the earthquake was induced by the strong concentration of tensile stress at the intersection of the fault at the east slope of Yulongxueshan Mountain with the Zhongdian-Yongsheng fault.