In nuclear power plants, irradiated materials like Control Rod (CR) should be stored Underwater after service. Due to reducing the storage space, underwater cutting technology is expected. In this study, we developed underwater cutting technology of thick stainless steel with YAG laser in order to cut used CR. Preliminary tests were preformed with flat plate test-pieces to optimize the cutting conditions. Due to creating a local dry area between nozzle and test-piece, high-pressure air was blown from the nozzle. Underwater laser cutting was carried out by laser irradiation power of 4kW, changing the parameters of cutting speed, distance between the nozzle and test-piece, and thickness of the test-piece. We also investigated the wastes like dross and aerosols by laser cutting. Amount of dross was approximately 0.1kg/m after cutting a 14mm thick stainless steel plate, which is estimated to be less than other cutting method. Based on these results, we developed underwater cutting system of CR test-piece with YAG laser as a mock-up test. In the cutting torch, there was tracking system was introduced to keep the distance between the nozzle and the test-piece constant, and cutting monitor was also set-in to detect whether the test-piece was successfully cut or not. We have already tried to cut the CR test-piece with this facility and successfully cut in half.