In a hypervelocity impact (HVI) between the micrometeoroids/orbital debris (MMOD) and multi-layered shielding mechanisms of spacecraft, the debris cloud, formed by shattered materials of the outer bumper layer and projectile, commits multitudinous pitting craters and cracks that are disorderedly scattered in the rear wall layer. Material degradation due to the pitting damage is a precursor of structural fragmentation and system failure of the space assets. In this study, microscopic material degradation of the rear wall of a typical dual-layered Whipple shield, initiated and intensified by the debris cloud-engendered pitting damage, is characterized using metallographic analysis including optical microscope (OM), laser scanning microscope (LSM), scanning electron microscope (SEM) and X-ray diffraction (XRD). Results have revealed that (1) the degree of material degradation shows difference in the central cratered area, the ring cratered area, and the spray area, respectively; (2) the dynamic recrystallization gives rise to the formation of fine grains adjacent to pitting craters; (3) the extents of recrystallization and dislocation depend on the strain rate levels during HVI; and (4) the temperature elevation, caused by the heat transformed from the adiabatic plastic deformation energy and shock heating, warrants the recrystallization. Two types of damage, namely micro-voids and micro-cracks, are identified beneath the pitting damage area; under the extremely high compressive strain rate induced by HVI, micro-voids are initiated by the nucleation of grains or deteriorate from existing material defects, and these micro-voids further expand at the grain boundaries and within the grains to form micro-cracks under a tensile-type wave converted from the HVI-induced shock wave.