Microdamage formation is a critical determinant of bone fracture and the nature and type of damage formed in bone depends on the interaction of its extracellular matrix (ECM) with the applied loading. More importantly, because bone is a hierarchical composite with multiple length scales linked to each other, the nature and type of damage in bone could also be hierarchical. In this review article, based on new unpublished data and a reanalysis of literature reports on in vivo and in vitro observations of microdamage, three length scales including mineralized collagen fibrils, lamellar and osteonal levels have been identified as the key contributors to microdamage hierarchy and energy dissipation in bone. Inherent hierarchy in bone’s ECM therefore has specific microstructural features and energy dissipation mechanisms at different length scales that allow the bone to effectively resist the different components of the applied physiological loading. Furthermore, because human bones experience multiaxial cyclic loading and their ECM is subjected to variation with aging and disease, additional emphasis is placed on investigating how the nature of applied loading and the quality of ECM affect the hierarchy of microdamage formation with age.