Nucleation points for contact fatigue failures in rolling bearings are identified. In cases where bearings are made from exceptionally clean steel, fatigue failures are frequently nucleated at minute surface imperfections. These have been classified as grinding furrows, pits, and dents. Regions of plastically deformed martensite are found in the vicinity of defects that are active or potential failure nuclei. Plastic deformation is also seen in the bulk material. The plastically deformed martensite is examined by light and electron microscopy and its role in fatigue failures is described.