At present, SnAgCu appears to be the leading lead-free solder in the electronics industry. Driven by miniaturization, decreasing the component size leads to a stronger influence of microstructure on the observed lifetime properties. The present study concentrates on the thermal fatigue response of a near-eutectic SnAgCu solder alloy with the objective ofcorrelating damage mechanisms with the underlying microstructure, on the basis of whicha thermo-mechanical fatigue damage evolution model is characterized. Bulk Sn4Ag0.5Cu specimens are thermally cycled between 40 and 125 C up to 4000 cycles. As a result of the intrinsic thermal anisotropy of the beta-Sn phase, thermal fatigue loading causes localizeddeformations, especially along Sn grain boundaries. Mechanical degradation of test specimens after temperature cycling is identified from a reduction of the global elasticity modulus measured at very low strains. Using OIM scans, the test specimens are modeled including the local grain orientations and the detailed microstructure. A traction-separationbased cohesive zone formulation with a damage variable that traces the fatigue historyis used to model interfacial interactions between grains. Damage evolution parameters areidentified on the basis of the experimentally obtained global elastic moduli after a certainnumber of cycles. The resulting damage evolution law is applied to a number of numericalexamples and the mismatch factor is discussed in detail. Finally, the damage evolution lawcharacterized in this study is exploited towards the fatigue life prediction of a 2D microstructure-incorporated BGA solder ball.