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The changes in the permeability of mudstone specimens under compression with different intermediate principal stresses (σ2) were tested using a true triaxial testing system. The confining pressure and pore pressure were set based on the caprock conditions in a CO2 geological storage project. The measured permeability initially increased and then decreased before the failure of the specimen and reached a peak in the form of a sudden increase during the formation of the fault. The permeability during compression decreased with increasing σ2. However, the higher σ2 caused the ductility of the mudstone to decrease significantly and led to the formation of a fault parallel to the σ2 direction. The increase in permeability during the formation of the fault was notably suppressed by the increase in the confining pressure and decreased with increasing flatness of the fault; the flatness of the fault increased with increasing σ2. Moreover, an empirical function that considers the compressive and dilatant strains was proposed to predict the permeability before the failure of the specimen, and the parameters of this function are only slightly affected by σ2. The results of this study reveal the effect of σ2 on the variation of the permeability of mudstone and help better assess the risk of caprock leakage in injection projects. © 2017 Society of Chemical Industry and John Wiley & Sons, Ltd.