Abstract: As one of the main trends in development of the high performance LWR fuel, the internally and externally cooled annular fuel, which is consist of two cladding and annular pellets, is proposed to be able to increase power density 20% to 50% while maintaining or improving safety margins comparable to currently operating LWR plants. This paper performed a fundamental research in the fields of annular fuel’s conceptual design, reactor physics, thermal-hydraulic, reactor safety, irradiation performance, economics and feasibility of fabrication. The results show clearly the advantage and feasibility of using annular fuel in PWR.