In recent years, rail transport of Canadian crude oil and coal has grown. While transportation of oil and coal by rail has demonstrated benefits, it has also raised significant concerns about transportation safety and potential impacts to the environment. In this regards, rolling contact fatigue (RCF) of railway components is one of the most crucial subjects to the safety of rail transportation. The RCF cracking is very sensitive to the microstructure of the rails which are mostly manufactured from pearlitic steels. Therefore, complete understanding of the effects of microstructural characteristics on the RCF phenomenon is critical for mitigating damage and life predictions so that components can be repaired or replaced in time before catastrophic failure occurs. In the current study, microstructural changes in pearlitic rail steels under fatigue loadings and their effects on the RCF crack initiation and propagation have been investigated by experimental and numerical approaches. Optical microscopy and micro-hardness testing are utilized to perform failure analysis on the rails that have been in service in the US. The morphologies and geometrical characteristics of the RCF cracks are analyzed. Moreover, the extent of plastic deformation in different regions of the rails is evaluated through microstructural analysis. Besides, other microstructural constituents including MnS based inclusions and white etching layers are evaluated. A microstructure-based model is built using Voronoi tessellation and continuum damage mechanics. The experimental results reveal that the maximum depths of cracks were mainly dependent on the grade of rail steel rather than the duration of service life. The maximum depths of the cracks were dependent on the thickness of largely deformed layer near the surface of the rails. Results of numerical simulations show occurrence of preferential strain accumulation in pro-eutectoid (PE) ferrite. As a result, a higher content of PE ferrite leads to a lower fatigue life of pearlitic rail steels.