Rotary punching is a sheet metal blanking process which utilizes shearing tools fixed to a pair of rollers. The polyurethane pad is adopted as the die instead of rigid mold because it has the advantages of wide hardness range and high load-bear capacity. Due to the application of polyurethane pad, the surrounding region adjacent to the pierced hole will occur to plastically deform and deflect, which greatly differs from that in the conventional blanking. In this paper, the effects of blank material and thickness, polyurethane hardness, punch penetration depth on deformation behavior were mathematically analyzed and modeled, and then a series of experiments through varying process parameters were conducted to validate the relationship between process parameters and product quality. The degree of sample deflection was exactly measured by scanning electron microscope (SEM). The results show that the deformed area varies with different blank elongations and increases with increasing blank thickness for a given material. When polyurethane pad with low hardness level is employed, it results in large area deformation and quality degradation. Moreover, the deflection degree around the hole edge becomes more severe along with punch penetration, but the penetration depth along blank thickness is not in proportion to the amount of punch advancement.