A local failure criterion for the API X65 steel is applied to predict ductile failure of full-scale API X65 pipes with simulated corrosion and gouge defects under internal pressure. The local failure criterion is the stress-modified fracture strain for the API X65 steel as a function of the stress triaxiality (defined by the ratio of the hydrostatic stress to the effective stress). Based on detailed FE analyses with the proposed local failure criteria, burst pressures of defective pipes are estimated and compared with experimental data. The Failure of corroded pipes is governed by local necking and plastic collapse in the defective region, rather than failure. For pipes with gouge defects, on the other hand, it is found that fracture is dominant. The predicted burst pressures are in good agreement with experimental data. Noting that an assessment equation against the gouge defect is not yet available, parametric study is performed, from which a simple equation is proposed to predict burst pressure for API X65 pipes with gouge defects.