Variable nozzle turbine (VNT) technology has become a popular technology for diesel engine application. To pivot the nozzle vane and adjust the turbine operating condition, nozzle clearances are inevitable on both the hub and shroud side of turbine housing. Leakage flow formed inside the nozzle clearance leads to extra flow loss and makes the nozzle exit flow less uniform, thus further affects downstream aerodynamic performance of the rotor. As the leakage mixing with nozzle wake flow, the process is highly unsteady, which increases the fluctuation amplitude of transient load on the rotating turbine wheels.In present paper, firstly steady CFD analysis of a turbocharger turbine was performed at different nozzle openings. Then unsteady simulation of the turbine was carried out to investigate the interaction between the leakage flow through nozzle clearance and the main flow. Nozzle clearance's effect on turbine performance was investigated. It was found that the leakage flow not only leads to pressure loss in nozzle vane passages, but also creates mixing loss as nozzle leakage flow merging with main flow in turbine wheels. With nozzle clearance, flow unsteadiness inside turbine wheels has been increased. A finite element model of the turbine wheel was built and turbine forced response to the transient loading was simulated with harmonic analysis. Due to the increased flow unsteadiness, nozzle clearance also leads to significant increase of turbine vibration stresses.