A fraction of hydrogen produced due to the waterside corrosion of Zircaloy-4 nuclear fuel cladding diffuses into it. Diffused hydrogen migrates up a stress gradient in the Zircaloy-4 and accrues in the regions of higher stress like a crack tip. When the concentration of hydrogen exceeds terminal solid solubility, it precipitates as brittle hydride phases. Hydride precipitated at the tip of a crack may induce crack instability, causing failure of the cladding. To understand the effects of hydride precipitated at the tip of a crack on crack instability in Zircaloy-4, a numerical investigation is performed on single-edge notched tension specimen by using the extended finite element method. The mechanical properties of the Zircaloy-4 cladding and hydride precipitated in itused in this numerical analysisare evaluated by using nanoindentation technique. The crack length is taken between 0.05 and 0.2 mm, while the length of the hydride is varied in the range of 0.1 to 0.2 mm. The influence of hydride dimensions, number of hydrides, orientation of hydrides, and distance of hydride from the crack tip on crack instability is evaluated. The stability of the crack is assessed in stress intensity factor and J-integral for each case. Results reveal that stress distribution around the crack tip is significantly altered by the precipitation of hydride. The circumferential hydride is less detrimental compared with the radial hydride. As the distance of hydride from the crack tip increases, there is a decline in the stress intensity factors and J-integrals, implicating that there may exist a critical distance beyond which hydride precipitation has negligible effect on crack instability.