In this study, to enhance the cutting efficiency and precision of the chip while minimizing waste from cutting damage, molecular dynamics simulation is used to investigate the formation mechanism of defects and cracks of silicon carbide crystals during the laser stealth dicing. The results showed that the high thermal stress generated by the laser scanning induced the production and expansion of cracks. Thus, the crack propagates in the direction of [100], and subsequently forms branches in the directions of [101] and [101‾]. It also can be found that the silicon carbide crystals produced dislocation slip, and the dislocation lines moved along the slip surface, which impeded the crack extension in the directions of [101‾] and [1‾01‾]. In addition, atomic phase transformation and loss is occurred under the high-temperature environment of the laser heating process. Cubic diamond crystal structure atoms are partially transformed into amorphous structure, while a small portion transformed into hexagonal diamond structure. The crystal structural arranged orderliness temporarily increased and then rapidly decreased due to prefabrication defects, and new unknown crystal structures are produced.