Surface nanocrystallization of metals and alloys via high-frequency ultrasonic shot peening (USP) can significantly increase the mechanical properties of the materials. However, the relationship between the external process parameters and the internal microstructure of the materials is still unclear and an accurate numerical model to simulate the USP process is urgently required for better control of the grain refinement process. In this study, we successfully realized surface nanocrystallization of 316L stainless steel using USP with an ultrasonic frequency and amplitude of 20 kHz and 50 μm, respectively. The microstructure evaluation of 316L stainless steel during USP was revealed. We established a finite element numerical model to simulate the high-frequency USP process and calculated the plastic strain and stress distribution of 316L stainless steel during the grain refinement process. We investigated the effects of the ultrasonic frequency, working distance, and ultrasonic amplitude on the plastic strain and stress distribution on the materials using the finite element simulation method. The dynamic behavior of the shot during the USP process was studied using a high-speed camera, and the FE simulation results agreed well with the experimental results. We also investigated the impact of multiple shots during the USP process by the high-speed camera observation and FE simulation. Research results indicate that high-frequency USP is an effective method to obtain large-scale bulk nanocrystalline materials and the finite element simulation can help materials scientists and engineers to better understand the relationship between the process parameters and microstructure evaluation of 316L stainless steel.