Nanoscale energy dissipation and failure mechanics of silica nano- and micro-particle-filled polymer composite have been evaluated using advanced electron microscopy, scanning probe microscopy and nanoindentation techniques. Objective of this study is to understand the role of nano-microstructure and strength of particle-matrix interface and effects of geometrical gradient (spatial variation of surface height) and mechanical gradient (spatial variation of effective modulus) on energy dissipation process and subsequent failure mechanisms. In order to understand the role of geometrical gradient and mechanical gradient during the energy dissipation process, we carried out amplitude modulation simulation of soft-hard-soft surfaces with zero initial height and with 10 nm initial height of the hard material. Nanoindentation results show hardness and reduced modulus of the nanocomposite are homogeneous; however, the hardness and reduced modulus of the microcomposite were found to be heterogeneous. In the microcomposite, the sharp edges of particles increase friction, and heterogeneous mechanical properties result in high-energy dissipation. Large particles with weak interfacial bonding were easily removed, it resulting in defects on the sliding surface that acted as failure "hot-spots". These characteristics result in relatively high friction and wear of the microcomposite. The nanocomposite showed better tribo-mechanical performance compared with that of the micro-particle-filled composite. © 2008 Springer Science+Business Media, LLC.