With increases in the use of multi-layered material in the aerospace industry to reduce weight while still meeting strength requirements, studying inter-layer burr formation in drilling of a multi-layered material becomes more important. Inter-layer gap formation due to material bending by drilling thrust force has significant effect on inter-layer burr formation. A finite element model for inter-layer gap formation in a multi-layered material was proposed. A gap formation was initiated by initial difference in elastic bending of layers and developed by plastic deformation of the first layer. Influence of clamping location on gap size was also investigated.