The mechanisms of nanoscale fatigue of functionally graded TiN/TiNi films have been studied using multiple-loading cycle nanoindentation and nano-impact tests. The functionally graded films were sputter-deposited onto silicon substrates, in which the TiNi film provides pseudo-elasticity and shape memory behavior, while a top TiN surface layer provides tribological and anti-corrosion properties. Nanomechanical tests were performed to investigate the localised film performance and failure modes of the functionally graded film using both Berkovich and conical indenters with loads between 100 μN and 500 mN. The loading history was critical to define film failure modes (i.e. backward depth deviation) and the pseudo-elastic/shape memory effect of the functionally graded layer. The results were sensitive to the applied load, loading mode (e.g. semi-static, dynamic) and probe geometry. Based on indentation force-depth profiles, depth-time data and post-test surface observations of films, it was concluded that the shape of the indenter is critical to induce localised indentation stress and film failure, and generation of pseudo-elasticity at a lower load range. Finite element simulation of the elastic loading process indicated that the location of subsurface maximum stress near the interface influences the backward depth deviation type of film failure.