At times dowelled glulam timber connections experience crack development in the fibre direction. The main reason for this is moisture variation in the timber elements which induces a stress perpendicular to the fibre direction. The aim of this paper is to study the influence of different moisture conditions and vertical dowel spacing on crack development through numerical simulations by use of the finite element method in three dimensions. A transient non-linear Fickian moisture diffusion model is implemented to simulate the moisture state within the glulam beam. The moisture gradient in the diffusion model was created by adopting a physical scenario by assuming what conditions the considered glulam beam will go through, from the factory up to installation. Further, an extended finite element method (XFEM) for two different vertical dowel spacing, 100 mm and 300 mm, with a linear elastic fracture mechanics (LEFM) approach was applied for the crack simulation. The results reveal that the moisture variation in combination with unfavourable placement of dowels can cause a crack to develop in the glulam timber beam. Moreover, it was shown that a moisture induced crack development may be modelled successfully by use of an Extended Finite Element Method (XFEM) approach.