This paper presents a new solution to reduce the thermal interference of vertical U-tube ground heat exchanger (UGHE): pipe insulation installed on the upward branch pipe of the U-tube. 3-dimensional numerical models of the UGHE with and without pipe insulation were developed to simulate the heat transfer process around the UGHE. The models were verified with previously published data. The effects of pipe insulation on outlet temperature, soil temperature, heat exchange rate per unit length of borehole depth and soil temperature recovery ratio were investigated. The effects of inlet velocity of heat transfer fluid (HTF) and the thermal conductivity of backfill material were also studied to fully assess the effects of the insulation. The results indicate that the average outlet temperature of HTF, soil temperature near the upward branch pipe and soil temperature recovery ratio all increased and the thermal interference can be effectively weakened when pipe insulation was installed. (C) 2016 Elsevier Ltd. All rights reserved.