The existing methods can hardly consider the actual state of geogrid ribs under loading，which can cause underestimating the settlement of the geogrid-encased stone column (GESC) composite foundation. The effective reinforced unit cell was employed as the analysis object, while GESC together with soil was assumed in constant strain distribution and as linear elastic materials. Stone column was constrained by geogrid and earth ring at the same time, while the earth ring can be considered as a ring with earth pressure at rest provided by soil outside and bulging pressure caused by the stone column installed inside. Hook's law was then introduced to gain the stress-strain formula of the unit cell. A different method of settlement calculation for GESC composite foundation was established. The rationality of the results of this method was verified by an engineering example and was compared with the existing method. The result demonstrates that the method agrees well with the engineering example. Compared with the existing method, the relative error between the calculated value and measured value is +5.70%, which demonstrates that the method presented in this paper is safer and more accurate as a result of combined top loading and lateral deformation of GESC together. The parametric study shows that the replacement ratio has a significant influence on controlling settlement of composite foundation, and increasing the replacement ratio can effectively reduce the pile - soil ratio and settlement of composite foundation when a certain level load is applied.