This paper investigates if cylindrical guided waves can be effectively used for pipe wall defect detection in soil-embedded pipes. For this purpose guided waves are propagated through pipes that are buried in the soil by placing transmitters on one end of the pipes and the receivers on the other end. Received signals for both defect-free and defective pipes are subjected to wavelet transforms. It is found that when a Continuous Wavelet Transform (CWT) based algorithm is applied to analyze the received signals then it is very easy to make distinction between damaged and undamaged pipes. To investigate whether embedding the pipe in the soil makes it more difficult to detect the pipe wall defects, the same set of defective and defect-free pipes are analyzed before and after burying them in the soil. In both cases the defects are easily detected after analyzing the wavelet transformed signals. Interestingly it can be detected more easily for the buried pipes because the difference between the received signal strengths from defect-free and defective pipes is found to be greater for the buried pipes. For soil embedded pipes the ultrasonic energy scattered by the defect is absorbed by the surrounding soil making the energy reaching the receiver significantly weaker than that for the defect-free soil embedded pipe.