Process modelling of sheet metal forming with contact is carried out by using the rigid-plastic finite element method based on the membrane theory. The sheet material is assumed to possess normal anisotropy and to obey Hill``s new yield criterion and its associated flow rule. An improved method of contact treatment is developed in which skew boundary condition is successively used during iteration. A simple but effective contact algorithm to decide the proper contact region is also suggested. In order to verify the validity of the developed method, axisymmetric stretching is analyzed and compared with the available axisymmetric FEM results. As three dimensional applications, two kinds of stretch forming are analyzed. The computational results are compared with the experiments. The comparison shows that the present method can be used effectively in the analysis of three-dimensional stretch forming.