The ductile fracture process in metallic materials is initiated by inhomogeneous plastic deformation, which in some metals is manifested as a dislocation cell substructure. The role of well-developed dislocation cells in the fracture process of AISI 4340 steel was investigated using transmission (TEM) and scanning electron microscopy (SEM). It was found that the ferrite and pearlite constitutes of the steel exhibit different dislocation substructures, with cells forming in ferrite grains and shear bands occurring in the ferrite lamellae of pearlite. The combined TEM and SEM results suggest that microcracks are initiated at cementite platelets in pearlite under the combined action of tensile loading and localized shear in the adjacent ferrite. Microcracks then propagate by the nucleation and coalescene of voids along the well-developed dislocation cell walls in the ferrite grains.