A theoretical model was established to assess the effect of circumferential inlet distortion on the aerodynamic stability of the variable cycle engine. The model incorporated source items into the two-dimensional unsteady Euler's equations to describe the flow through variable cycle engine. The source items were calculated according to the component characteristic and the equations were solved by time-advancing method. The circumferential inlet distortion transfer curve along the flow path and the critical distortion factor of the variable cycle engine were obtained. The results suggest that the model accomplishes the simulation of inlet distortion effect on aerodynamic stability of variable cycle engines. The inlet distortion experiences a great attenuation when passing through the core driven fan stage. The core driven fan stage is sensitive to distortion. It is the weakest link of the aerodynamic stability of the variable cycle engine.