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In this article, one of the new casing treatment methods for improving of compressor performance have been investigated. Stepped tip gap is one of the appropriate methods of casing treatment that its functionality in axial compressors have been proved lately. In the present study, for the first time, effects of stepped tip gap on stall margin improvement of a centrifugal compressor have been evaluated numerically. Simulation has been done using Fluent software and k-ε turbulence modeling. To find the optimum geometry of stepped tip gap, seven casing geometries with one untreated smooth wall were considered. Results of velocity contours and streamlines patterns on various azimuthal and meridional planes showed that by using casing with stepped tip gap, tip leakage flow has been weaken and flow blockage in compressor main passage has been reduced. Hence, stepped tip gap extends the stable operating range of compressor and delays the occurrence of stall phenomenon. Results of present research, shows that by using stepped tip gap with optimum size, stall margin of the proposed compressor was improved by 7.38%.