Nanocrystalline surface layer was fabricated on a 45 steel by using Surface mechanical treatment. The microstructure features of various sections in the surface layer were characterized by using transmission electron microscopy and X-ray diffraction. The Refinement process of the pearlite was analyzed. Experimental evidence showed plastic deformation in the proeutectoid ferrite phase has precedence over the cementite phase. The cementite phase were dissolved and sheared under high interface energy and stress concentration caused by high density dislocations. At the subsurface the distance between segment of the pearlite was reduced to about 50–100nm, and the cementite was sheared into the short-thin fragments and particles, and the ferrite was evolved into fragments with size of less than 100nm. At the surface all cementite phases were nearly decomposed, and grains in the fragment ferrite phase were refined by forming the fine and roughly equiaxed cells and transforming DDWs into subboundaries and boundaries.