Single crystal MgO can be used as the substrates to deposit HTS films. The subsurface damage (SSD) generated in processing has great effect on the strength and performance of the substrates. However, the characteristics of MgO SSD and its formation mechanism have not been understood fully. In this paper, the surface and subsurface damage caused by saw cutting, rough lapping and fine lapping of MgO substrates were studied by cross-section of microscopy and SEM. The formation mechanism was discussed; and a SSD model was presented.