The fracture of a drilling tail made of 18CrNi3MoA steel in the exchanging water hole was analyzed in terms of inclusions, prior austenite grain size, carburized layers, and fatigue fracture morphology by means of optical microscopy, quantitative metallography, and scanning electron microscopy (SEM). Fatigue crack initiation and propagation on the drilling tail were also studied. The results showed that the fracture on the drilling tail was not induced by inclusions and the distribution inhomogeneity of prior austenite grain size. Instead, because the outside surface of the exchanging water hole was not continuously geometric, there was a great deal of stress concentration in those areas under continuous twisting, axial impact, and corrosion of mineral water. Thus three crack sources emerged in these areas. Initial cracks centered on these sources spread from the outside surface to the inside surface, and eventually the drilling tail ruptured. Furthermore, the fractograph of the region around the crack sources exhibited a typical ductile dimple fracture pattern, and cracks initiated on the outside surface of the carburized layers of the exchanging water hole. Three crack sources could be the sources of fatigue crack propagation. Based on the analysis of fatigue crack propagation, it was further demonstrated that fatigue damage originated from the outside surface of the exchanging water hole.