Sub-surface initiated spalling remains a key factor in determining the ultimate life of properly maintained bearings. In its early stages, spalling is manifested by the development of cracks and accompanying microstructure alterations, so-called butterflies, around the microstructure inhomogeneities. Base upon a unique three-dimensional microscopic characterisation of a large population of butterflies in VIM-VAR M50 samples that underwent rolling contact fatigue under different experimental conditions, the key factors determining butterfly nucleation and growth has been identified. The work identifies the conditions for crack nucleation and growth, and quantitatively relates them to microstucture. The model encompasses the sub-surface stress field and the microstructural parameters of the material leading to crack growth. Outputs of numerical evaluation of the model show good agreement with experimental data concerning number density, depth distribution and size distribution of butterflies across the wide range of fatigue test conditions.