To maintain the surrounding rock in a frozen state, permafrost tunnels often incorporate an insulation layer within the tunnel lining structure to prevent freeze-thaw damage. The thickness of the insulation layer is a critical parameter affecting the stability and economic viability of permafrost tunnel structures. Addressing this concern, we developed a hydro-thermal coupling model that takes seepage and ice-water phase transition into accout. This model was integrated into COMSOL Multiphysics for practical application. Focusing on a tunnel located in Qinghai Province, we conducted an optimization study of the insulation layer thickness at the tunnel entrance section. The findings revealed that the tunnel arch position was identified as the unfavorable position for the optimization design, and the highest temperature within the tunnel excavation occurred on May 23 of the first year, which was deemed unfavorable for the optimization design. Moreover, the highest temperature at the unfavorable position decreased with the increase of the insulation layer thickness, and through a fitting formula, the optimal insulation layer thickness was calculated to be 7.2 cm. Under this optimal thickness, the temperature of the surrounding rock behind the tunnel lining can remain below 0 ℃, effectively preventing freeze-thaw damage. In the design of the tunnel’s insulation structure, an insulation layer thickness of 7.2 cm can enhance the stability of the surrounding rock tunnel structure.