This work investigates the effect of abnormal microstructure on rolling contact fatigue (RCF) damage of high-speed railway wheels under service and the formation mechanism of abnormal microstructure by optical microscopy, scanning electron microscopy, transmission electron microscopy, nano indentation and laser-induced break down spectroscopy. Results show that there are large amounts of upper bainite in the wheel tread, which destroyed the uniformity of the microstructures of the wheel matrix. The bainite is composed of ferrite with high density of dislocations and short bar-shaped cementite. The bainite exhibited higher hardness and elasticity but lower plasticity than the matrix microstructure. The incongruity of plastic deformation between upper bainite and matrix microstructures will lead to stress concentration at boundary of the microstructures, thus accelerating the RCF crack initiation and propagation. The formation of upper bainite is caused by carbon segregation. Segregation of carbon element will make the continuous cooling transformation (CCT) curve shift to the right significantly, thus increasing the probability of bainite transformation in segregation zone at higher cooling rate. Therefore, large amounts of upper bainite were formed at wheel tread.