Nanocrystalline gold and nickel thin films were prepared by both ion beam sputter deposition and electron beam evaporation techniques. The grain sizes were between 8–60 nm, depending on the processing. The deformation and fracture behavior of these nanostructural thin films were then investigated in a high resolution electron microscope (HREM) with atomic resolution. The behavior was a strong function of grain size. During slow strain rate deformation of small grain size materials (< 25 nm), nanopores formed and grew at grain boundary triple junctions in the front of crack and eventually linked with the main crack. The coalescence of the main crack with the growing nanopore, along with the elimination of the ligament between the two by a diffusive process, both indicated that diffusion played a role in deformation and fracture of these nanocrystalline thin films. In nickel films with larger grain sizes (> 25 nm), the cracks propagated in a mixed mode which was partially intergranular and partially transgranular. The transgranular propagation was crystallographic in nature, showing very fine, distinct crystallographic facets on the crack faces. It is suggested that a transition from intergranular propagation to a “cleavage-like” mechanism of propagation occurs with the increase of grain size.