The remaining life assessment of damaged railway axles is an important topic primarily because of extending the maintenance interval. However, the fatigue resistance of surface-strengthened materials is extremely challenging due to the gradient-distributed microstructure, tensile properties, and residual stresses across the axle. To elucidate the fatigue cracking behaviors of induction-hardened S38C railway axles, the residual stress field ranging from −400 MPa to zero near the axle surface were rebuilt using a new unit pressure and proportional-integral approach (UPA) instead of complicated heat simulation. The fatigue life of full-scale S38C railway axles was then predicted by employing a real vertical load spectrum. The results show that in the presence of a 4.0-mm-deep crack, the remaining life of a damaged axle with compressive residual stresses is more than three times that of an axle without compressive residual stresses. In addition, the crack front is surrounded by a compressive stress field when the crack depth does not exceed 4.0 mm, which is the probable detection limit for the maximum crack depth extension. The present work is expected to serve a basic reference for the optimization and extension of the inspection intervals for induction-hardened S38C railway axles.