The susceptibility of railway wheels to wear and rolling contact fatigue damage is influenced by the properties of the wheel material. These are influenced by the steel composition, wheel manufacturing process, and thermal and mechanical loading during operation. The in-service properties therefore vary with depth below the surface and with position across the wheel tread. This paper discusses the stress history at the wheel/rail contact (derived from dynamic simulations) and observed variations in hardness and microstructure. It is shown that the hardness of an "in-service" wheel rim varies significantly, with three distinct effects. The underlying hardness trend with depth can be related to microstructural changes during manufacturing (proeutectoid ferrite fraction and pearlite lamellae spacing). The near-surface layer exhibits plastic flow and microstructural shear, especially in regions which experience high tangential forces when curving, with consequentially higher hardness values. Between 1 mm and 7 mm depth, the wheel/rail contacts cause stresses exceeding the material yield stress, leading to work hardening, without a macroscopic change in microstructure. These changes in material properties through the depth of the wheel rim would tend to increase the likelihood of crack initiation on wheels toward the end of their life. This correlates with observations from several train fleets.