A computational model for the impacts of ultrahigh velocity micro-particles on steels, at the conditions relevant to abrasive waterjet (AWJ) machining, is developed using the AUTODYN software. By introducing the work hardening effect at the strain rate above 104 s−1 and Bao–Wierzbicki fracture locus into Johnson–Cook material models, the developed model can more realistically reflect the material behaviour subject to ultrahigh velocity micro-particle impacts. An experiment with high velocity (350–700 m/s) particle impacts on a high tensile steel was conducted, and the resulting crater volumes were measured and used to assess the computational model. It is found that the average error of the simulated crater volumes from the corresponding experimental data is within 10%. Based on the developed model, the transfer from impact energy to plastic work, and finally to crater volume is studied, along with the relation between plastic deformation, crater volume and material removal as well as the effect of impact variables and the target material yield strength on the impact behaviours. Three material failure modes (failures induced by inertia, elongation and adiabatic shear banding) are identified for spherical particle impacts. It is shown that while the crater formation is caused by plastic deformation near the impact site, the material removal process is associated with ductile failure mechanisms which are not only dependent on the magnitude of the plastic strain, but also the stress and thermal conditions.