For hydraulic structures constructed on deep alluvium layers, a suspended cutoff wall is commonly embedded in the foundation to improve the seepage failure resistance and reduce the seepage flow rate. To investigate the effect of a suspended cutoff wall on the seepage failure pattern and reveal the underlying mechanism, this study used transparent soil materials as substitutes for real soil to construct foundation models with a suspended cutoff wall and employed the planar laser-induced fluorescence technique to visualize the changes in particle migration and fabric in the models. A total of 28 tests were conducted on uniform sand foundations and gravel foundations with different sand contents and different wall embedment patterns. The transparent soil model tests provided visual evidence of two typical failure patterns in foundations: (1) backward erosion developed from the seepage exit and (2) internal erosion initiated at both the bottom of the cutoff wall and the seepage exit. Furthermore, numerical modeling was also performed to complement and facilitate the in-depth analysis of the failure mechanisms. It was found that for the case of backward erosion, the hydraulic head at the moment of failure was governed by the critical hydraulic gradient at the seepage exit. In contrast, for internal erosion, the failure hydraulic head could be approximately determined based on the average hydraulic gradient along the downstream seepage path of the cutoff wall.