Stone columns (or granular piles) are increasingly being used for ground improvement, particularly for flexible structures such as road embankments, oil storage tanks, etc. When the stone columns are installed in extremely soft soils, the lateral confinement offered by the surrounding soil may not be adequate to form the stone column. Consequently, the stone columns installed in such soils will not be able to develop the required load-bearing capacity. In such soils, the required lateral confinement can be induced by encasing the stone columns with a suitable geosynthetic. The encasement, besides increasing the strength and stiffness of the stone column, prevents the lateral squeezing of stones when the column is installed even in extremely soft soils, thus enabling quicker and more economical installation. This paper investigates the qualitative and quantitative improvement in load capacity of the stone column by encasement through a comprehensive parametric study using the finite element analysis. It is found from the analyses that the encased stone columns have much higher load carrying capacities and undergo lesser compressions and lesser lateral bulging as compared to conventional stone columns. The results have shown that the lateral confining stresses developed in the stone columns are higher with encasement. The encasement at the top portion of the stone column up to twice the diameter of the column is found to be adequate in improving its load carrying capacity. As the stiffness of the encasement increases, the lateral stresses transferred to the surrounding soil are found to decrease. This phenomenon makes the load capacity of encased columns less dependent on the strength of the surrounding soil as compared to the ordinary stone columns. © 2006 Elsevier Ltd. All rights reserved.