During hard cutting process there is severe thermodynamic coupling effect between cutting tool and workpiece, which causes quenching effect on finished surfaces under certain conditions. However, material phase transformation mechanism of heat treatment in cutting process is different from the one in traditional process, which leads to changes of the formation mechanism of damaged layer on machined workpiece surface. This paper researches on the generation mechanism of damaged layer on machined surface in the process of PCBN tool hard cutting hardened steel Cr12MoV. Rules of temperature change on machined surface and subsurface are got by means of finite element simulation. In phase transformation temperature experiments rapid transformation instrument is employed, and the effect of quenching under cutting conditions on generation of damaged layer is revealed. Based on that, the phase transformation points of temperature under cutting conditions are determined. By experiment, the effects of cutting speed and tool wear on white layer thickness in damaged layer are revealed. The temperature distribution law of third deformation zone is got by establishing the numerical prediction model, and thickness of white layer in damaged layer is predicted, taking the tool wear effect into consideration. The experimental results show that the model prediction is accurate, and the establishment of prediction model provides a reference for wise selection of parameters in precise hard cutting process. For the machining process with high demanding on surface integrity, the generation of damaged layer on machined surface can be controlled precisely by using the prediction model.