In this paper, hole flangeability of steel sheet is evaluated by experiment and finite element analysis with respect to the hole processing condition. It is necessary to verify the hole flangeability of a material as a forming limit in order to predict and prevent the undesirable fracture during a flanging process. Hole expanding tests are carried out to identify the effect of the hole processing conditions on the hole expanding ratio (HER), which is an indicator of the hole flangeability. Specimens with two different hole conditions are prepared: one is produced with punching process; and the other is reamed after punching to get smoother hole surface. The experimental results show that the facture mechanism and the HER are quite different with respect to the hole conditions. For the thorough investigation of those effects, tensile tests of a specimen with notches are performed. From the experiments, the fracture strain is obtained with different hole conditions and a finite element analysis of the hole flanging process carried out using the strain. The experimental results are confirmed and reevaluated by finite element analysis of the hole flanging process with ductile fracture criterion proposed.