In this paper, case study on outlet cracking is first conducted for the Goupitan and Xiaowan arch dams. A nonlinear FEM method is then implemented to study effects of the outlets on integral stability of the Xiluodu arch dam under two loading conditions, i.e., normal loading and overloading conditions. On the basis of the case study and the numerical modelling, the outlet cracking mechanism, risk, and corresponding reinforcement measures are discussed. Furthermore, the numerical simulation reveals that (1) under the normal loading conditions, the optimal distribution of the outlets will contribute to the tensile stress release in the local zone of the dam stream surface and decrease the outlet cracking risk during the operation period. (2) Under the overloading conditions, the cracks initiate around the outlets, then propagate along the horizontal direction, and finally coalesce with those in adjacent outlets, where the yield zone of the dam has a shape of butterfly. Throughout this study, a dam outlet cracking risk control and reinforcement principle is proposed to optimize the outlet design, select the appropriate concrete material, strengthen the temperature control during construction period, design reasonable impounding scheme, and repair the cracks according to their classification.