Squats, observed in numerous railway networks worldwide, are a significant concern for rail track maintenance. This work presents a specific case study of a rail fracture failure associated with squat defects. A detailed microstructural analysis was conducted to investigate the causes of squat formation, subsequent crack propagation, transverse defects, and fracture. According to the findings, the initiation of squats can be attributed to the presence of White Etching Layers on the rail surface and rolling contact fatigue. After the initiation of Squats, the cracks extended downwards into the bulk rail at a shallow angle until reaching a sizeable martensitic island located in the subsurface of the rail along the path of crack propagation. The brittleness of the undesired martensitic structure triggered rapid crack development, facilitated transverse cracking, and ultimately resulted in rail fracture failure. Transmission electron microscopy examination confirmed that the abnormal defec