Effect of crystal structure of surface compound layer on the fatigue strength of nitrided SCM 435 steel was investigated. Specimens in which the crystal structure of the surface compound layer was controlled to γ’-Fe₄N phase or ε-Fe_2-3N phase were prepared by gas nitriding treatment capable of changing nitriding potential (K_N). Axial fatigue test were conducted to the specimens. Even in each test specimen which has different crystal structure of the compound layer, distribution of residual stress and hardness in the nitrogen diffusion layer exhibited almost same values. It is revealed that fatigue strength significantly depends on crystal structure of surface compound layer. Specimens with γ’-Fe₄N phase dominant shows substantially high fatigue strength comparing to specimens with ε-Fe_2-3N phase dominant. In the fatigue test under stress ratio R=0, the specimen from which the surface compound layer was removed showed the highest strength. The fatigue strength is considered to be governed by the fracture strength of each compound layer. Namely, in the specimen with ε-Fe_2-3N phase dominant, fatigue cracks are induced by fracture of brittle ε-Fe_2-3N phase layer and progress into nitrogen diffusion layer due to stress intensity factor (ΔK) at crack tip exceeds the threshold of stress intensity factor range (ΔK_th) in the matrix. On the other hand, in the case of γ’-Fe₄N phase dominant, γ’-Fe₄N phase with high toughness showed high fatigue strength due to suppress the crack initiation up to a higher stress level.