Economical and ecological considerations are the driving force in applying newly developed high strength multiphase steels combining high strength and, good formability in automotive applications. Although the mechanical behaviour of TRIP steels has been investigated by various researchers during the last decades, less information has been gained so far concerning the failure mechanisms of these steels. The aim of this study is to clarify the role of the microstructure in the damage evolution. The influence of the TRIP effect on the crack initiation and the impact of the different phases in the development of cracks are important factors which control the fracture mechanisms. These fracture mechanisms of TRIP steels have been investigated on the base of extensive SEM investigations. A first theory has been developed. On the micro-scale, two failure modes appear, cleavage and ductile fracture, depending on the stress-strain-condition, the internal cleanness, the volume fraction of the retained austenite and the position of the austenite and the martensite gains. If a martensite or an austenite gain fails inside of a bainitic island, the crack develops rapidly leading to cleavage fracture. If the failure starts inside the ferritic matrix due to void initiation at hard phases, the emerged void causes ductile damage on the surrounding ferrite. In order to correlate microstructure and fracture, simulations of representative volume elements were performed using FEM.