An anisotropic mechanical behaviour of cortical bone and its intrinsic hierarchical microstructure act as protective mechanisms to prevent catastrophic failure due to natural loading conditions;​ however, they increase the extent of complexity of a penetration process in the case of orthopaedic surgery. Experimental results available in literature provide only limited information about processes in the vicinity of a tool–bone interaction zone. Also, available numerical models the bone-cutting process do not account for material anisotropy or the effect of damage mechanisms. In this study, both experimental and numerical studies were conducted to address these issues and to elucidate the effect of anisotropic mechanical behaviour of cortical bone tissue on penetration of a sharp cutting tool. First, a set of tool-penetration experiments was performed in directions parallel and perpendicular to bone axis. Also, these experiments included bone samples cut from four different cortices to evaluate the effect of spatial variability and material anisotropy on the penetration processes. Distinct deformation and damage mechanisms linked to different microstructure orientations were captured using a micro-lens high-speed camera. Then, a novel hybrid FE model employing a smoothed-particle-hydrodynamic domain embedded into a continuum FE one was developed based on the experimental configuration to characterise the anisotropic deformation and damage behaviour of cortical bone under a penetration process. The results of our study revealed a clear anisotropic material behaviour of the studied cortical bone tissue and the influence of the underlying microstructure. The proposed FE model reflected adequately the experimental results and demonstrated the need for the use of the anisotropic and damage material model to analyse cutting of the cortical-bone tissue.