Failure cause of the fractured engine parts was analyzed by microstructural observation. These parts were failed far earlier than the expected service life. By the stereoscope and SEM examinations of the fractured surface, the fracture modes have been identified as wear and fatigue failure. From the observation of microstructure and microhardness measurements of the failed gears, the probable cause for failures are internal oxidation during using and retained austenite and carbide networks due to heat-treatment, respectively. These defected structures at near surface contributed to the wear and fatigue failure.