Silicon carbide (SiC) is a promising semiconductor material for high-performance power electronics devices, but difficult to machine. The development of cost-effective machining technology for SiC wafers requires a complete understanding of the interaction between diamond grit and workpiece material. This work systematically investigated the deformation and crack formation of monocrystalline 4H-SiC involved in single grit grinding using molecular dynamics (MD) simulation. The mechanism for crack initiation and propagation in monocrystalline 4H-SiC was revealed for the first time. Our simulation results showed that the subsurface damage at the earlier stage of plastic deformation was caused by amorphization and dislocation initiation. With the progress of penetration, slip bands were formed. The extension of slip bands in the later stage of plastic deformation was the cause of crack initiation. Stress analysis demonstrated that the tensile stresses parallel to the scratch direction and perpendicular to the scratch plane were the driving force for the crack initiation ahead of a diamond abrasive grit, while the tensile stress perpendicular to the scratch plane was responsible for the crack initiation underneath the grit. The propagation of the two cracks was driven by the maximum principal stress at the crack tip, and the propagation direction depends on the direction of the maximum principal stress.