Tip clearance flow is a complex phenomenon that occurs between the rotor blade tip and the inner surface of the duct of a pump-jet propulsor. The tip clearance size significantly influences both the tip clearance flow and the performance of the pump-jet propulsor. Previous studies on tip clearance flow primarily focused on cases with tip clearance sizes less than 4 mm on model scale. Tip clearance flow of pump-jet propulsors with tip clearance sizes of 1 mm and 16 mm were simulated based on large eddy simulation in this paper. The study focuses on the characteristics of tip clearance flow in the large tip clearance pump-jet propulsor and the effects on cavitation inception, hydrodynamic performance, and duct pressure fluctuation. The results indicate that, compared to smaller tip clearance, the starting position of tip-separation vortex of pump-jet propulsor with large tip clearance is closer to the leading edge of rotor, while the intersection position of tip-separation vortex and tip-leakage vortex is closer to the trailing edge of rotor. Furthermore, the propulsion efficiency of the pump-jet propulsor behind SUBOFF is reduced by approximately 10%. The vorticity and circulation of tip-leakage vortex are larger, and cavitation inception of tip-leakage vortex occurs earlier. The amplitude of fluctuating pressure on duct inner surface is significantly decreased by about 80%. Therefore, the design of the pump-jet propulsor should be made based on comprehensive balance of the above-mentioned performance characteristics to find the optimal tip clearance size.