Failure in engineering materials like steels is strongly affected by in-service deleterious alterations in their microstructure. White Etching Layers (WELs) are an example of such in-service alterations in the pearlitic microstructure at the rail surface. Cracks initiate in the rails due to delamination and fracture of these layers and propagate into the base material posing severe safety concerns. In this study, we investigate the microscale fracture behaviour of these WELs. We use in situ elastic-plastic fracture mechanics using J-integral to quantify the fracture toughness. Although usually assumed brittle, the fracture toughness of 21–25 MPa√m reveals a semi-brittle nature of WELs. Based on a comparison of the fracture toughness and critical defect size of WELs with the undeformed pearlitic steels, WELs are detrimental for rails. In the micro fracture tests, WELs show crack tip blunting, branching, and significant plasticity during crack growth due to their complex microstructure. The fracture behaviour of the WELs is governed by their microstructural constituents such as phases (martensite/austenite), grain size, dislocation density and carbon segregation to dislocations and grain boundaries. We observed dislocation annihilation in some martensitic grains in the WELs which also contributes to their fracture behaviour. Additionally, the strain-induced transformation from austenite to martensite affects the crack growth and fracture. © 2019 Acta Materialia Inc.