It has been well known that Hadfield steel behaviors excellent wear resistance under high impact energy. Up to now there exist many theories to explain the wear mechanism of Hadfield steel. In this research subsurface microstructure evolution process of Hadfield steel was investigated after high energy impact experiments. It was shown from high resolution electron microscope (HRTEM) examination of subsurface microstructure that nanocrystallized austenite grains have been formed in the procedure of the reaction and rearrangement of high density dislocations under the heavy plastic deformation, sub-grains as a transitional structure and, finally, the formation of nano austenite grains. On the other side, the interactions of twins and stack faults or dislocations and stack faults make austenite crystals transform to amorphous solid. With increasing impact cycles the sizes of nano-grains were decreased and the amorphous volumes were increased further. A large amount of nano-sized grains embedded in bulk amorphous matrix were fully developed, which will dominate the wear of the steel. In the subsurface no martensitic transformation was observed.