The presented results are an outcome of ongoing research on optimization of the bi-material tube extrusion process. Both physical and numerical modeling techniques have been used in this study. Application of the finite element method. (FEM) to extrusion operations has proved to be an effective tool for process analysis and optimization. The influence-of die design and initial billet geometry on metal flow in tube extrusion with a mandrel is the focus of the performed research. Process parameters such as die design and billet geometry. can be optimized individually but the combined effect is much more pronounced. Initial billet geometry was optimized with the special focus on the ratio of the inner material thickness to the outer material thickness within the extrusion billet. The visioplasticity technique was used for physical modeling and the numerical modeling was performed using the Finite Element Method DEFORM(TM) package. Obtained experimental results confirmed the influence of the initial bi-material billet geometry and die design on the geometrical stability of the extrudate cross-section. The proposed process modifications resulted in improved process yield. The experimental results obtained in physical modeling experiments are in a very good agreement with the results of the numerical simulation.