Dramatic temperature changes will lead to uneven expansion and contraction, and then create transient stress cycles that inevitably result in thermal fatigue damage. In this study, the thermal fatigue crack initiation and propagation behaviors of a typical directionally solidified superalloy DZ125 under 900 °C and 1000 °C were investigated systematically using a homemade and calibrated thermal fatigue facility. The maximum thermal stress was evaluated by the finite element method, and the evolutions of the microstructures and the changes of mechanical properties during thermal fatigue process were characterized by scanning electron microscopy, transmission electron microscopy, and nanoindentation. Results show that the crack was initiated at the phase interfaces and grain boundaries, and the crack propagated along the weakened channel formed by the deformed γ' phase and the oxide. The stress field at the crack tip and the degree of oxidation reaction together determine the rate of crack growth. This work may provide new insights into thermal fatigue mechanisms and advanced superalloy design.