Rolling contact fatigue (RCF) cracks such as rail squats and gauge corner cracking have been observed to occur in rail heads due to the accumulation of RCF caused by repeated wheel passage. In order to develop methods for preventing these cracks, it is important to accurately predict crack initiation and propagation. To construct a crack initiation prediction model, it is necessary to quantitatively evaluate crack initiation and wear development, however, no systematic study has been carried out. The aim of this study is to evaluate the characteristics of crack initiation/propagation and wear development. Firstly, twin-disc RCF tests were carried out with wheel and heat-treated rail materials. Secondly, the specimens were analyzed by microscopic observation to evaluate crack initiation/propagation and wear development, as well as the effects of plastic deformation and work hardening on the surface microstructure of the material. The result confirmed that, for crack initiation and propagation, the change in the number of cracks, the mean crack length, and the frequency distribution of cracks tended to decrease with the increase in the number of rotations. As for wear development, the wear coefficient was identified by applying Archard’s wear law, and it was confirmed that the wear coefficient tended to decrease with increasing slip ratio. It was also confirmed that the thickness of the plastic flow and the hardness in the sub-surface increased with increasing slip ratio.